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Table of Contents
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
F O R M 10-K

☒ | Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the fiscal year ended December 31, 2023
or

☐ | Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the transition period from to
Commission File Number 001-39472
CNB FINANCIAL CORPORATION
(Exact name of registrant as specified in its charter)

Pennsylvania |  | 25-1450605
(State or other jurisdiction of incorporation or organization) |  | (I.R.S. Employer Identification No.)

1 South Second Street
P.O. Box 42
Clearfield, Pennsylvania 16830
(Address of principal executive office)
Registrant’s telephone number, including area code (814) 765-9621

Securities registered pursuant to Section 12(b) of the Act:
Title of Class |  | Trading Symbol(s) |  | Name of each exchange on which registered
Common Stock, no par value |  | CCNE |  | The NASDAQ Stock Market LLC
Depositary Shares (each representing a 1/40th interest in a share of 7.125% Series A Non-Cumulative, perpetual preferred stock) |  | CCNEP |  | The NASDAQ Stock Market LLC

Securities registered pursuant to Section 12 (g) of the Act: None
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. ☐ Yes ☒ No
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. ☐ Yes ☒ No
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. ☒ Yes ☐ No
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). ☒ Yes ☐ No
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer", "smaller reporting company", and "emerging growth company" in Rule 12b-2 of the Exchange Act. (Check one):

Large Accelerated Filer |  | ☐ |  | Accelerated Filer |  | ☒
Non-accelerated filer |  | ☐ |  | Smaller reporting company |  | ☐
|  |  |  | Emerging growth company |  | ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. ☒
If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing reflect the correction of an error to previously issued financial statements. ☐
Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received by any of the registrant’s executive officers during the relevant recovery period pursuant to § 240.10D-1(b). ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). ☐ Yes ☒ No
The aggregate market value of the voting and non-voting common equity held by non-affiliates of the registrant, based on the last sales price quoted on the Nasdaq Global Select Market on June 30, 2023, the last business day of the registrant’s most recently completed second fiscal quarter, was approximately: $349,396,611
The number of shares outstanding of the registrant’s common stock as of March 6, 2024: 21,024,812 shares
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the definitive Proxy Statement for the 2024 Annual Meeting of Stockholders to be held on April 16, 2024 are incorporated by reference into Part III of this report.

Table of Contents
TABLE OF CONTENTS

|  | Page Number
PART I. |  |
ITEM 1. | Business | 1
ITEM 1A. | Risk Factors | 12
ITEM 1B. | Unresolved Staff Comments | 22
ITEM 1C. | Cybersecurity | 22
ITEM 2. | Properties | 23
ITEM 3. | Legal Proceedings | 23
ITEM 4. | Mine Safety Disclosures | 23
PART II. |  |
ITEM 5. | Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities | 24
ITEM 6. | Reserved | 25
ITEM 7. | Management’s Discussion and Analysis of Financial Condition and Results of Operations | 25
ITEM 7A. | Quantitative and Qualitative Disclosures about Market Risk | 51
ITEM 8. | Financial Statements and Supplementary Data | 52
ITEM 9. | Changes in and Disagreements with Accountants on Accounting and Financial Disclosure | 120
ITEM 9A. | Controls and Procedures | 120
ITEM 9B. | Other Information | 120
ITEM 9C. | Disclosure Regarding Foreign Jurisdictions that Prevent Inspections | 121
PART III. |  |
ITEM 10. | Directors, Executive Officers and Corporate Governance | 121
ITEM 11. | Executive Compensation | 121
ITEM 12. | Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters | 121
ITEM 13. | Certain Relationships and Related Transactions, and Director Independence | 121
ITEM 14. | Principal Accountant Fees and Services | 121
PART IV. |  |
ITEM 15. | Exhibits and Financial Statement Schedules | 122
ITEM 16. | Form 10-K Summary | 125
SIGNATURES |  | 126

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PART I.
The disclosures set forth in this item are qualified by Item 1A. Risk Factors and the section captioned "Forward-Looking Statements and Factors that Could Affect Future Results" in Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations of this report and other cautionary statements set forth elsewhere in this report.
ITEM 1. BUSINESS
CNB Financial Corporation (the "Corporation") is a financial holding company registered under the Bank Holding Company Act of 1956, as amended (the "BHC Act"). It was incorporated under the laws of the Commonwealth of Pennsylvania in 1983 for the purpose of engaging in the business of a financial holding company. On April 26, 1984, the Corporation acquired all of the outstanding capital stock of County National Bank, a national banking chartered institution. In December 2006, County National Bank changed its name to CNB Bank (the "Bank") and became a state bank chartered in Pennsylvania and subject to regulation by the Pennsylvania Department of Banking and Securities (the "Pennsylvania Department of Banking") and the Federal Deposit Insurance Corporation. In October 2013, the Corporation acquired FC Banc Corp. and its subsidiary, The Farmers Citizens Bank. In July 2016, the Corporation acquired Lake National Bank, and in July 2020, the Corporation acquired Bank of Akron.
In addition to the Bank, the Corporation has four other subsidiaries. CNB Securities Corporation is incorporated in Delaware and currently maintains investments in debt and equity securities. CNB Insurance Agency, incorporated in Pennsylvania, provides for the sale of nonproprietary annuities and other insurance products. CNB Risk Management, Inc. is a Delaware-based captive insurance company which insures against certain risks unique to the operations of the Corporation and its subsidiaries and for which insurance may not be currently available or economically feasible in today's insurance marketplace. Holiday Financial Services Corporation ("Holiday"), incorporated in Pennsylvania, offers small balance unsecured loans and secured loans, primarily collateralized by automobiles and equipment, to borrowers with higher risk characteristics.
CNB Bank
The Bank was originally chartered as a national bank in 1934 and is now a Pennsylvania-chartered bank. The CNB Bank franchise operates nineteen full-service branch locations in Central and North Central Pennsylvania.
ERIEBANK, a division of the Bank, began operations in 2005. In July 2016, the Corporation acquired Lake National Bank, which operated two full-service branches in Mentor, Ohio, approximately 20 miles east of Cleveland, Ohio. The Bank continues to operate one of these branch locations within its ERIEBANK franchise, with the other location ceasing operations in August 2020. In January 2020, the Corporation established a loan production office ("LPO") in Cleveland, Ohio. This LPO operated within the ERIEBANK division as of December 31, 2021 and has subsequently closed. In conjunction with the closing of the LPO, the Corporation opened a full-service branch in Cleveland, Ohio. The Bank currently operates twelve full-service branch locations within its ERIEBANK franchise, a division of the Bank, with its headquarters in Erie, Pennsylvania.
In October 2013, the Corporation acquired FC Banc Corp. and its subsidiary, The Farmers Citizens Bank. The Bank currently operates seven full-service branch locations as FCBank, a division of the Bank, with its headquarters in Worthington, Ohio.
In 2016, the Bank received regulatory approval to conduct business in the state of New York as BankOnBuffalo, a division of the Bank. In July 2020, the Corporation acquired Bank of Akron, with its branch locations operating with BankOnBuffalo. The Bank currently operates eleven branch locations, one mobile branch, one drive-up office, and one loan production office as BankOnBuffalo, a division of the Bank, with its headquarters in Buffalo, New York.
In 2021, the Bank received regulatory approval to conduct business in the state of Virginia as Ridge View Bank, a division of the Bank. The Bank currently operates two full-serve branch locations and one LPO in Southwest Virginia.
In 2023, the Bank launched Impressia Bank, a full-service banking division dedicated to the professional and financial development and advancement of women business owners and women leaders. This women-focused commercial bank operates within the existing geographic footprint of each of CNB Bank’s other divisions and also has an online presence.
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The Bank had two loan production offices, one drive-up office, one mobile office, and 51 full-service branch offices located in various communities in its market area at December 31, 2023. The CNB Bank franchise's primary market areas are the Pennsylvania counties of Blair, Cambria, Centre, Clearfield, Elk, Indiana, Jefferson, and McKean. ERIEBANK, a division of the Bank, operates in the Pennsylvania counties of Crawford, Erie, and Warren and in the Ohio counties of Ashtabula, Cuyahoga, Geauga, Lake, and Lorain. FCBank, a division of the Bank, operates in the Ohio counties of Crawford, Delaware, Franklin, Knox, Marion, Morrow and Richland. BankOnBuffalo, a division of the Bank, operates in the New York counties of Erie and Niagara. Ridge View Bank, a division of the Bank, operates in the Virginia counties of Botetourt, Craig, Franklin, and Roanoke. Impressia Bank, a division of the Bank, operates in the Bank’s primary market areas.
The Bank is a full-service bank engaging in a full range of banking activities and services for individual, business, governmental and institutional customers. These activities and services principally include checking, savings, and time deposit accounts; real estate, commercial, industrial, residential and consumer loans; and a variety of other specialized financial services. The Bank’s Private Client Solutions division offers a full range of client services, including private banking and wealth and asset management.
Holiday Financial Services Corporation
In 2005, the Corporation entered the consumer discount loan and finance business, which is conducted through Holiday, a wholly-owned subsidiary. Holiday currently has nine offices within the Corporation’s market area.
Competition
The financial services industry in the Corporation’s service area continues to be extremely competitive, both among commercial banks and with other financial service providers such as consumer finance companies, thrifts, investment firms, mutual funds, and credit unions. The increased competition has resulted from changes in legal and regulatory guidelines as well as from economic conditions. Mortgage banking firms, leasing companies, financial affiliates of industrial companies, brokerage firms, retirement fund management firms, and even government agencies provide additional competition for loans and other financial services. Some of the financial service providers operating in the Corporation’s market area operate on a large-scale regional or national basis and possess greater resources than those of the Corporation. The Corporation is generally competitive with all competing financial institutions in its service area with respect to interest rates paid on time and savings deposits, service charges on deposit accounts, and interest rates charged on loans.
Supervision and Regulation
The Corporation is a bank holding company that has elected financial holding company status, and the Bank is a Pennsylvania state-chartered bank that is not a member of the Federal Reserve System. Accordingly, the Corporation is subject to the oversight of the Board of Governors of the Federal Reserve System (the "Federal Reserve Board") and the Pennsylvania Department of Banking and is regulated under the BHC Act, and the Bank is subject to the oversight of the Pennsylvania Department of Banking and Federal Deposit Insurance Corporation ("FDIC"), as its primary federal regulator. The Corporation and the Bank are also subject to various requirements and restrictions under federal and state law, such as requirements to maintain reserves against deposits, restrictions on the types, amounts and terms and conditions of loans that may be granted, and limitations on the types of investments that may be made and the types of services that may be offered. Various consumer financial protection laws and regulations also affect the operation of the Bank and, pursuant to the Dodd-Frank Wall Street Reform and Consumer Protection Act (the "Dodd-Frank Act"), the Consumer Financial Protection Bureau ("CFPB") is authorized to write additional rules on consumer financial products and services which could affect the operations of the Bank and Holiday. In addition to the impact of regulation, commercial banks are significantly affected by the actions of the Federal Reserve Board, including actions taken with respect to interest rates, as the Federal Reserve Board attempts to control the money supply and credit availability in the U.S. in order to influence the economy.
The following summary sets forth certain of the material elements of the regulatory framework applicable to bank holding companies and their subsidiaries and provides certain specific information about us and our subsidiaries. It does not describe all of the provisions of the statutes, regulations and policies that are identified. To the extent that the following information describes statutory and regulatory provisions, it is qualified in its entirety by express reference to each of the particular statutory and regulatory provisions. A change in applicable statutes, regulations or regulatory policy may have a material effect on our business.
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Bank Holding Company Regulation
As a bank holding company that controls a Pennsylvania state-chartered bank, the Corporation is subject to regulation and examination by the Pennsylvania Department of Banking and the Federal Reserve Board. We are required to file with the Federal Reserve Board an annual report and such additional information and submissions as the Federal Reserve Board may require pursuant to the BHC Act, and applicable regulations. For instance, the BHC Act requires each bank holding company to obtain the approval of the Federal Reserve Board before it may acquire substantially all the assets of any bank, or before it may acquire ownership or control of any voting shares of any bank if, after such acquisition, it would own or control, directly or indirectly, more than five percent of any class of voting shares of such bank. Such a transaction may also require approval of the Pennsylvania Department of Banking.
Pursuant to provisions of the BHC Act and regulations promulgated by the Federal Reserve Board thereunder, the Corporation may only engage in, or own companies that engage in, activities deemed by the Federal Reserve Board to be permissible for bank holding companies or financial holding companies. Activities permissible for bank holding companies include those that are so closely related to banking or managing or controlling banks as to be a proper incident thereto. Activities for financial holding companies include those that are "so closely related to banking as to be a proper incident thereto" as well as certain additional activities deemed "financial in nature or incidental to such financial activity" or complementary to a financial activity and that do not pose a substantial risk to the safety and soundness of the banking organization or the financial system.
The Corporation must obtain permission from or provide notice to the Federal Reserve Board prior to engaging in most new business activities.
Regulation of CNB Bank
Federal and state banking laws and regulations govern, among other things, the scope of a bank’s business, the investments a bank may make, the reserves against deposits a bank must maintain, the loans a bank makes and collateral it takes, the activities of a bank with respect to mergers and acquisitions, the establishment of branches, management practices, and numerous other aspects of banking operations.
Source of Strength Doctrine
Under Section 616 of the Dodd-Frank Act, a bank holding company is required to serve as a source of financial strength to its subsidiary banks and may not conduct its operations in an unsafe or unsound manner. In addition, it is the Federal Reserve Board’s policy that a bank holding company must also serve as a source of managerial strength to its subsidiary banks, and a bank holding company should stand ready to use available resources to provide adequate capital funds to its subsidiary banks during periods of financial stress or adversity and should maintain the financial flexibility and capital-raising capacity to obtain additional resources for assisting its subsidiary banks. A bank holding company’s failure to meet its obligations to serve as a source of strength to its subsidiary banks will generally be considered by the Federal Reserve Board to be an unsafe and unsound banking practice, a violation of the Federal Reserve Board regulations, or both. This doctrine is commonly known as the "source of strength" doctrine.
Identity Theft
The Fair Credit Reporting Act’s Red Flags Rule requires financial institutions with covered accounts (e.g., consumer bank accounts and loans) to develop, implement, and administer an identity theft prevention program. This program must include reasonable policies and procedures to detect suspicious patterns or practices that indicate the possibility of identity theft, such as inconsistencies in personal information or changes in account activity.
Capital Adequacy
The Capital Rules adopted in 2013 by the Federal Reserve Board, the FDIC, and the Office of the Comptroller of the Currency ("OCC") generally implement the Basel Committee on Banking Supervision’s capital framework, referred to as Basel III, for strengthening international capital standards. The Capital Rules revise the definitions and components of regulatory capital, increase risk-based capital requirements, and make selected changes to the calculation of risk-weighted assets. The risk-weighting categories in the Capital Rules are standardized and include a risk-sensitive number of categories, depending on the nature of the assets, generally ranging from 0% for U.S. government and agency securities to 600% for certain equity exposures, and resulting in higher risk weights for a variety of assets.
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The Capital Rules: (i) include “Common Equity Tier 1” (“CET1”) and a related regulatory capital ratio of CET1 to risk-weighted assets; (ii) specify that Tier 1 capital consists of CET1 and “Additional Tier 1 capital” instruments meeting certain revised requirements; (iii) mandate that most deductions/adjustments to regulatory capital measures be made to CET1 and not to the other components of capital; and (iv) expand the scope of the deductions from and adjustments to capital as compared to existing regulations. Under the Capital Rules, for most banking organizations, including the Corporation, the most common form of Additional Tier 1 capital is non-cumulative perpetual preferred stock, and the most common forms of Tier 2 capital are subordinated notes and a portion of the allocation for allowance for credit losses, in each case, subject to the Capital Rules’ specific requirements.
Pursuant to the Capital Rules, effective January 1, 2015, the minimum capital ratios are as follows:
•4.5% CET1 to risk-weighted assets;
•6.0% Tier 1 capital (that is, CET1 plus Additional Tier 1 capital) to risk-weighted assets;
•8.0% Total capital (that is, Tier 1 capital plus Tier 2 capital) to risk-weighted assets; and
•4.0% Tier 1 capital to average consolidated assets as reported on consolidated financial statements (called “leverage ratio”).
The Capital Rules also include a “capital conservation buffer,” composed entirely of CET1, in addition to these minimum risk-weighted asset ratios (which are each of the first three ratios described above, but not the leverage ratio). The capital conservation buffer is designed to absorb losses during periods of economic stress. Banking institutions that do not hold the requisite capital conservation buffer will face constraints on dividends, capital instrument repurchases, interest payments on capital instruments and discretionary bonus payments based on the amount of the shortfall. Thus, the capital standards applicable to the Corporation include an additional capital conservation buffer of 2.5% of CET1, effectively resulting in minimum ratios inclusive of the capital conservation buffer of (i) CET1 to risk-weighted assets of at least 7%, (ii) Tier 1 capital to risk-weighted assets of at least 8.5%, and (iii) total capital to risk-weighted assets of at least 10.5%.
The Capital Rules provide for a number of deductions from and adjustments to CET1. These include, for example, the requirement that mortgage servicing assets, deferred tax assets arising from temporary differences that could not be realized through net operating loss carrybacks, and significant investments in non-consolidated financial entities be deducted from CET1 above certain thresholds. In July 2019, the OCC, the Federal Reserve Board and the FDIC adopted a final rule intended to simplify the Capital Rules described above for non-advanced approaches rule institutions, including provisions related to these deductions and adjustments. Institutions were required to implement the provisions of the simplification rule by April 1, 2020.
The Capital Rules also permit most banking organizations to retain, through a one-time permanent election, the capital treatment that existed before the 2013 Capital Rules were issued for accumulated other comprehensive income. The Corporation made the one-time permanent election to retain the previous capital treatment for accumulated other comprehensive income.
The Capital Rules also preclude certain hybrid securities, such as trust preferred securities, from inclusion in bank holding companies’ Tier 1 capital, although bank holding companies that had total consolidated assets of less than $15 billion at December 31, 2009 may include trust preferred securities issued prior to May 19, 2010 as a component of Tier 1 capital.
In September 2019, the OCC, the Federal Reserve Board and the FDIC adopted a final rule that is intended to further simplify the Capital Rules for depository institutions and their holding companies that have less than $10 billion in total consolidated assets, such as us, if such institutions meet certain qualifying criteria. This final rule became effective on January 1, 2020. Under this final rule, if we meet the qualifying criteria, including having a leverage ratio (equal to Tier 1 capital divided by average total consolidated assets) greater than 9%, we will be eligible to opt into the community bank leverage ratio framework. If we opt into this framework, we will be considered to have satisfied the generally applicable risk-based and leverage capital requirements in the Capital Rules (as modified pursuant to the simplification rule) and will be considered to have met the well-capitalized ratio requirements for prompt corrective action purposes. To date, we have not opted in to this community bank leverage ratio framework.
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Dividend Restrictions
The Corporation is a legal entity separate and distinct from the Bank. Declaration and payment of cash dividends by the Corporation depends upon cash dividend payments to the Corporation by the Bank, which is our primary source of revenue and cash flow.
As a Pennsylvania state-chartered bank, the Bank is subject to regulatory restrictions on the payment and amounts of dividends under the Pennsylvania Banking Code. Further, the ability of banking subsidiaries to pay dividends is also subject to their profitability, financial condition, capital expenditures and other cash flow requirements.
The payment of dividends by the Bank and the Corporation may also be affected by other factors, such as the requirement to maintain adequate capital above regulatory requirements. The federal banking agencies have indicated that paying dividends that deplete a depository institution’s capital base to an inadequate level would be an unsafe and unsound banking practice. A depository institution may not pay any dividend if payment would cause it to become undercapitalized or if it already is undercapitalized. Moreover, the federal banking agencies have issued policy statements that provide that bank holding companies and insured banks should generally only pay dividends out of current operating earnings. Federal banking regulators have the authority to prohibit banks and bank holding companies from paying a dividend if the regulators deem such payment to be an unsafe or unsound practice.
Prompt Corrective Action and Safety and Soundness
Under applicable "prompt corrective action" ("PCA") statutes and regulations, depository institutions are placed into one of five capital categories, ranging from "well capitalized" to "critically undercapitalized." The PCA statute and regulations provide for progressively more stringent supervisory measures as an insured depository institution’s capital category declines. An institution that is not well capitalized is generally prohibited from accepting brokered deposits and offering interest rates on deposits higher than the prevailing rate in its market. An undercapitalized depository institution must submit an acceptable restoration plan to the appropriate federal banking agency. One requisite element of such a plan is that the institution’s parent holding company must guarantee compliance by the institution with the plan, subject to certain limitations.
At December 31, 2023, the Bank qualified as "well capitalized" under applicable regulatory capital standards.
Bank holding companies and insured depository institutions may also be subject to potential enforcement actions of varying levels of severity by the federal banking agencies for unsafe or unsound practices in conducting their business, or for violation of any law, rule, regulation, condition imposed in writing by the agency, or term of a written agreement with the agency. In more serious cases, enforcement actions may include the issuance of directives to increase capital; the issuance of formal and informal agreements; the imposition of civil monetary penalties; the issuance of a cease and desist order that can be judicially enforced; the issuance of removal and prohibition orders against officers, directors, and other institution affiliated parties; the termination of the insured depository institution’s deposit insurance; the appointment of a conservator or receiver for the insured depository institution; and the enforcement of such actions through injunctions or restraining orders based upon a judicial determination that the FDIC, as receiver, would be harmed if such equitable relief was not granted.
Community Reinvestment Act
Under the Community Reinvestment Act of 1977 ("CRA"), the FDIC is required to assess the record of all financial institutions it supervises to determine if these institutions are meeting the credit needs of the community (including low and moderate income neighborhoods) which they serve. CRA performance evaluations are based on a four-tiered rating system: Outstanding, Satisfactory, Needs to Improve, and Substantial Noncompliance. CRA performance evaluations are considered in evaluating applications for such things as mergers, acquisitions, and applications to open branches. The Bank received a CRA rating of "Satisfactory" at its most recent CRA exam. The FDIC, along with other federal bank regulators, published in October 2023 substantially updated regulations regarding CRA, which will become effective on April 1, 2024, with various phase-in periods.
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Restrictions on Transactions with Affiliates and Insiders
The Bank is subject to the restrictions of Sections 23A and 23B of the Federal Reserve Act and the implementing Regulation W. The Bank's "affiliates" for purposes of these sections include, among other potential entities, the Corporation and its direct subsidiaries. Section 23A requires that loans or extensions of credit by the Bank to an affiliate, purchases by the Bank of securities issued by an affiliate, purchases by the Bank of assets from an affiliate (except as may be exempted by order or regulation), the Bank’s acceptance of securities or debt obligations issued by an affiliate as collateral for a loan or extension of the credit to a third party, the Bank’s acceptance of a guarantee or letter of credit on behalf of an affiliate, a transaction with an affiliate involving the borrowing or lending of securities to the extent the transaction causes the Bank to have credit exposure to the affiliate, and a derivative transaction with an affiliate, to the extent the Bank will have credit exposure to the affiliate (collectively, "Covered Transactions") be on terms and conditions consistent with safe and sound banking practices. Section 23A also imposes various qualitative and quantitative requirements and restrictions on Covered Transactions and imposes collateralization and other requirements on certain of these transactions. Section 23B requires that all Covered Transactions and certain other transactions, including the sale of securities or other assets by the Bank to an affiliate and the payment of money or the furnishing of services by the Bank to an affiliate, be on terms comparable to those prevailing for similar transactions with nonaffiliates.
The Bank is also subject to Sections 22(g) and 22(h) of the Federal Reserve Act, and the implementation of Regulation O issued by the Federal Reserve Board. These provisions impose limitations on loans and extensions of credit by the Bank to its and its affiliates' executive officers, directors and principal shareholders and their related interests. The limitations restrict the terms and aggregate amount of such transactions. Regulation O also imposes certain recordkeeping and reporting requirements.
Deposit Insurance and Premiums
The deposits of the Bank are insured up to applicable limits per insured depositor by the FDIC. The standard maximum deposit insurance amount is $250,000 per depositor, per insured depository institution, per ownership category, in accordance with applicable FDIC regulations.
The FDIC uses a risk-based assessment system that imposes insurance premiums based on a risk matrix that takes into account the bank’s capital level and supervisory rating. The base for insurance assessments is the average consolidated total assets less tangible equity capital of a financial institution. Assessment rates are calculated using formulas that take into account the risk of the institution being assessed.
In November 2023, the FDIC announced a special assessment on all insured depository institutions with more than $5 billion in total assets, including the Bank, in order to recover the loss to the DIF associated with protecting uninsured depositors following the closures of Silicon Valley Bank and Signature Bank. The special assessment will be collected beginning with the first quarterly assessment period of 2024. The assessment base for the special assessment is equal to an insured depository institution’s ("IDI’s") estimated uninsured deposits reported as of December 31, 2022, adjusted to exclude the first $5 billion, applicable either to the IDI, if an IDI is not a subsidiary of a holding company, or at the banking organization level, to the extent that an IDI is part of a holding company with one or more subsidiary IDIs.
Financial Privacy and Data Security
The Corporation is subject to federal laws, including the Gramm-Leach-Bliley Act, and certain state laws containing consumer privacy protection provisions. These provisions limit the ability of banks and other financial institutions to disclose nonpublic information about consumers to affiliated and non-affiliated third parties and limit the reuse of certain consumer information received from non-affiliated financial institutions. These provisions require notice of privacy policies to consumers and, in some circumstances, allow consumers to prevent disclosure of certain nonpublic personal information to affiliates or non-affiliated third parties by means of opt-out or opt-in authorizations.
The Gramm-Leach-Bliley Act requires that financial institutions implement comprehensive written information security programs that include administrative, technical, and physical safeguards to protect consumer information. Federal banking agencies have also adopted guidelines for establishing information security standards and programs to protect such information. Further, pursuant to interpretive guidance issued under the Gramm-Leach-Bliley Act and certain state laws, financial institutions are required to notify customers of security breaches that result in unauthorized access to their nonpublic personal information.
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Incentive Compensation
The Dodd-Frank Act requires the federal banking agencies and the Securities and Exchange Commission (the "SEC") to establish joint regulations or guidelines prohibiting incentive-based payment arrangements at specified regulated entities, including the Corporation and the Bank, with at least $1 billion in total consolidated assets that encourage inappropriate risks by providing an executive officer, employee, director or principal shareholder with excessive compensation, fees, or benefits that could lead to material financial loss to the entity. The federal banking agencies and the SEC most recently proposed such regulations in 2016. The regulations have not yet been finalized, but it is expected that this rulemaking will be a priority in 2024. If the regulations are adopted in the form initially proposed or a similar form, they will restrict the manner in which executive compensation is structured.
USA PATRIOT Act
Under Title III of the USA PATRIOT Act, all financial institutions are required to take certain measures to identify their customers, prevent money laundering, monitor customer transactions, and report suspicious activity to U.S. law enforcement agencies. Financial institutions also are required to respond to requests for information from federal banking agencies and law enforcement agencies. Information sharing among financial institutions for the above purposes is encouraged by an exemption granted to complying financial institutions from the privacy provisions of the Gramm-Leach-Bliley Act and other privacy laws. Financial institutions that hold correspondent accounts for foreign banks or provide private banking services to foreign individuals are required to take measures to avoid dealing with certain foreign individuals or entities, including foreign banks with profiles that raise money laundering concerns, and are prohibited from dealing with foreign "shell banks" and persons from jurisdictions of particular concern. The primary federal banking agencies and the Secretary of the Treasury have adopted regulations to implement several of these provisions. All financial institutions also are required to establish internal anti-money laundering programs. The effectiveness of a financial institution in combating money laundering activities is a factor to be considered in any application submitted by the financial institution under the Bank Merger Act. The Bank has in place a Bank Secrecy Act and USA PATRIOT Act compliance program and engages in very few transactions of any kind with foreign financial institutions or foreign persons.
Office of Foreign Assets Control Regulation
The United States government has imposed economic sanctions that affect transactions with designated foreign countries, nationals, and others. These are typically known as the "OFAC" rules based on their administration by the U.S. Treasury Department Office of Foreign Assets Control. The Office of Foreign Assets Control-administered sanctions targeting countries take many different forms. Generally, they contain one or more of the following elements: (i) restrictions on trade with or investment in a sanctioned country, including prohibitions against direct or indirect imports from and exports to a sanctioned country and prohibitions on U.S. persons engaging in financial transactions relating to making investments in, or providing investment-related advice or assistance to, a sanctioned country; and (ii) a blocking of assets in which the government or specially designated nationals of the sanctioned country have an interest, by prohibiting transfers of property subject to U.S. jurisdiction (including property in the possession or control of U.S. persons). Blocked assets (property and bank deposits) cannot be paid out, withdrawn, set off, or transferred in any manner without a license from the Office of Foreign Assets Control. Failure to comply with these sanctions could have serious legal and reputational consequences.
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Other Federal Laws and Regulations
State usury and other credit laws limit the amount of interest and various other charges collected or contracted by a bank on loans. The Bank is also subject to lending limits on loans to one borrower and regulatory guidance on concentrations of credit. The Bank’s loans and other products and services are also subject to numerous federal and state consumer financial protection laws, including, but not limited to, the following:
•Truth-In-Lending Act, which governs disclosures of credit terms to consumer borrowers;
•Truth-in-Savings Act, which governs disclosures of the terms of deposit accounts to consumers;
•Home Mortgage Disclosure Act, requiring financial institutions to provide information to regulators to enable determinations as to whether financial institutions are fulfilling their obligations to meet the home lending needs of the communities they serve and not discriminating in their lending practices;
•Equal Credit Opportunity Act, prohibiting discrimination on the basis of race, sex or other prohibited factors in extending credit;
•Real Estate Settlement Procedures Act, which imposes requirements relating to real estate settlements, including requiring lenders to disclose certain information regarding the nature and cost of real estate settlement services;
•Fair Credit Reporting Act, covering numerous areas relating to certain types of consumer information and identity theft;
•Privacy provisions of the Gramm-Leach-Bliley Act and related regulations, which require that financial institutions provide privacy policies to consumers, to allow customers to "opt out" of certain sharing of their nonpublic personal information, and to safeguard sensitive and confidential customer information;
•Electronic Funds Transfer Act, which is a consumer protection law regarding electronic fund transfers; and
•Numerous other federal and state laws and regulations, including those related to consumer protection and bank operations.
Governmental Policies
Our earnings are significantly affected by the monetary and fiscal policies of governmental authorities, including the Federal Reserve Board. Among the instruments of monetary policy used by the Federal Reserve Board to implement these objectives are open-market operations in U.S. Government securities and federal funds, changes in the discount rate on member bank borrowings and changes in reserve requirements against member bank deposits. These instruments of monetary policy are used in varying combinations to influence the overall level of bank loans, investments and deposits, and the interest rates charged on loans and paid for deposits. The Federal Reserve Board frequently uses these instruments of monetary policy, especially its open-market operations and the discount rate, to influence the level of interest rates and to affect the strength of the economy, the level of inflation or the price of the dollar in foreign exchange markets. The monetary policies of the Federal Reserve Board have had a significant effect on the operating results of banking institutions in the past and are expected to continue to do so in the future. It is not possible to predict the nature of future changes in monetary and fiscal policies, or the effect which they may have on our business and earnings.
Other Legislative Initiatives
Proposals may be introduced in the United States Congress, in the Pennsylvania Legislature, and/or by various bank regulatory authorities that could alter the powers of, and restrictions on, different types of banking organizations and which could restructure part or all of the existing regulatory framework for banks, bank and financial holding companies and other providers of financial services. Moreover, other bills may be introduced in Congress which would further regulate, deregulate or restructure the financial services industry, including proposals to substantially reform the regulatory framework. It is not possible to predict whether any such proposals will be enacted into law or, even if enacted, what effect such action may have on our business and earnings.
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Human Capital
As of December 31, 2023, the Corporation had a total of 801 employees, of which 765 were full time and 36 were part time.
The Corporation respects and values the responsibilities of the Corporation to be reasonably environmentally considerate, socially responsible including avoiding discrimination of any investors, customers, and employees by promoting an increasingly diverse and inclusive profile in our company, reflective of the communities we serve. In addition to the above-described Board attributes, the Corporation emphasizes relevant governance principles in strategic planning, human capital management and leadership development (which includes recruiting and retaining employees), and vendor management, as relationships with third parties represent critical connections to and extensions of the values and operating principles of the Corporation and Board.
Strategic Planning and Related Training
The Corporation has established a formal Strategic Plan, and the framework of the Strategic Plan considers the core values and principles that have been fundamental to the Corporation's long-term success. These attributes include respect, integrity, accountability, leadership, professionalism, collaboration, client-focused, innovation, inclusion, and volunteerism. In establishing these core values and principles as the foundation upon which all other strategic objectives are anchored, the Corporation seeks to further develop and sustain a corporate culture with sensitivity to the entirety of the Corporation’s business and demographic footprint and environment in which it operates. The differences among the Board and employees, and its customers and community members, are respected and embraced to drive innovative products, services, and solutions that effectively meet the variety of needs among the Corporation’s diverse group of stakeholders.
To ensure that the core values and corporate responsibility principles are understood, implemented, and demonstrated by the Corporation’s employee team on a sustained basis, the Corporation developed comprehensive communication processes and a training curriculum which was rolled out to all employees, including establishing a committee focused on ensuring diversity, equity, and inclusion issues are considered in our employee activities. Our employee resources include a certified diversity and inclusion trainer, and external training courses. Employee experience committees were also formed in 2022 to explore and evaluate how various diversity, equity and inclusion ("DEI") topics impact our employees and how we can better address them. The Corporation conducted a company-wide survey on DEI to monitor progress and solicit feedback. The results of this survey were utilized to develop areas of focus for 2023.
Diversity, Equity and Inclusion Committee
The Bank's Diversity, Equity and Inclusion Committee ("DEI Committee") plays a crucial role in providing a platform for employee members from underrepresented groups and their allies to have their voices heard, promote education and availability of resources, ensure fair representation, and contribute ideas for consideration by the Bank’s key decision-makers. The input to Senior Management from the DEI Committee, which generally meets monthly or more frequently as warranted, includes initiatives to address the unique challenges and opportunities faced by underrepresented groups. The DEI Committee reviews policies, practices, and procedures to identify and eliminate potentially discriminatory practices, potential bias, and inequality. The DEI Committee works toward promoting a culture of nondiscrimination and inclusion within the Bank, fostering a sense of belonging for employees from diverse backgrounds. In 2023, the Bank further demonstrated its continuing commitment to its organizational culture by establishing two employee resource groups ("ERGs") – "Bankers with Pride" and "CNB in Color". These ERGs provide a safe and inclusive space while fostering a culture that promotes diversity and acceptance. CNB in Color is an ERG focused on supporting employees from Black, Indigenous, and People of Color (BIPOC) communities, while Bankers with Pride is aimed at supporting employees who identify with the LGBTQIA+ community. The ERGs supplement the efforts of the Bank’s DEI Committee, helping to ensure representation, equity, and fairness for all employees, irrespective of their gender, identity, racial or ethnic background. Currently, there are 58 employees involved in DEI initiatives with the Bank through the DEI Committee and ERGs.
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Human Capital Management and Leadership Development
The Corporation seeks to recognize the unique contribution each employee brings to the Corporation, and the Corporation is fully committed to supporting a workplace that understands, accepts and values the similarities and differences between individuals. The Corporation’s key human capital management objectives are to recruit, hire, develop and promote a deeply experienced and diverse employee team, supplemented by similarly inclusive and diversity-focused third-party vendors, that collectively translate into a strong workforce committed to fostering, promoting, and preserving the entire spectrum of our communities and culture, while successfully executing our business strategies and demonstrating our corporate values. To support these objectives, the Corporation’s Employee Experience processes and programs are designed and operated to:
•Attract and develop talented employees across the spectrum of professional experience, life experience, socio-economic background, gender, race, religion, skill set, and geographic representation;
•Prepare all members of our team for critical roles and leadership positions both now and the future, in serving as employees and valuable community members;
•Reward and support employees fairly and without discrimination based on successful performance and through competitive pay and benefit programs;
•Enhance the Corporation’s culture through efforts to better understand, foster, promote, and preserve a culture of diversity and inclusion; and
•Evolve and invest in technology, tools, and resources to better support employees of varying skills and backgrounds at work.
Among the means the Corporation uses to monitor its performance in employee experience and management, the Corporation takes recurring management and employee demographic measurements and engagement surveys, and utilize the results to identify progress made, as well as areas in need of more attention, in improving the effectiveness of its leadership development and workforce profile, and personnel management practices.
A critical measure is realizing increasing diversity in the Corporation's senior leadership positions, as those members of the Corporation’s management have greater ability to demonstrate their professional skills and experience, effectuate sustained change in the composition of its team, and provide the Corporation with their important financial services expertise to ensure The Corporation benefits from the relevant involvement of all groups within the spectrum of its workforce and communities. The Corporation is proud of the diversity it has achieved within the Corporation’s senior leadership team, which is comprised of 19 individuals, of which 58% are female or members of underrepresented minority groups.
Overall, the Corporation’s workforce is 66% female and 34% male, as reported by those who self-identified. In addition, 14% of the Corporation’s workforce self-identified as a member of an underrepresented minority group. The Corporation identifies its underrepresented minority groups as those including individuals who self-identify as an ethnicity other than white, LGBTQ+, or are a military veteran or active military reservist.
As a result of broadening the Corporation's recruitment efforts to increase the diversity of its teams, for the year ended December 31, 2023, 33 people out of 167 total hires for the Corporation identified as being from an underrepresented group. The Corporation's efforts to identify qualified candidates from underrepresented minority group has allowed the Corporation to continue to improve its overall diversity workforce profile, as the Corporation's regional banks’ employee teams are moving towards better alignment with the overall demographics of the respective communities they serve.
Community Involvement and Social Impacts
The Corporation serves as a cornerstone institution of both financial support and community service in the markets in which we serve. The Corporation is committed to strengthening these communities through the active volunteering of its employees. The Corporation’s employees actively participate in their local communities through volunteer activities in education, economic development, human and health services, and community reinvestment. During 2023, employees donated 22,486 hours in support of more than a thousand organizations, with 77% of employees actively participating. Additionally, there were approximately $1.1 million in donations to community organizations and events within the communities the Corporation serves. Notably, in 2023, the Corporation’s Martin Luther King, Jr. “Take the Day On” efforts resulted in 158 employees donating 503 hours of their time across the communities the Corporation serves. Employees collected donations and delivered them to local organizations in need during this national day of service, which typically serves as a bank holiday.
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Throughout its history, the Corporation has focused on strengthening the communities it serves. The Corporation accomplishes this by promoting economic development through investments in community-strengthening initiatives, such as affordable housing and revitalization efforts. As of December 31, 2023, the Corporation’s investment in affordable housing totaled approximately $8.2 million, with an additional investment commitment of approximately $800 thousand, and $2.5 million invested in the Erie Downtown Development Corporation, which is focused on revitalization efforts in downtown Erie, Pennsylvania.
The Corporation expanded its efforts surrounding its financial literacy outreach in 2023, conducting six Financial Reality Fairs in various regions throughout the footprint the Corporation serves. The fairs included eleven high schools and almost 1,500 students. One hundred and sixteen employees donated over 1,428 hours of volunteer time and leveraged partnerships with thirty-one community organizations. The Corporation's employees and community volunteers not only shared their real-life knowledge of budgeting, but also provided additional financial education after the events. In addition to the fairs, employees participated in 243 other financial literacy events ranging from basic community banking sessions to school presentations. Employees contributed 1,263 hours of their time to participate in the Corporation’s financial literacy program. Further, the Corporation sponsored elementary and secondary banking curriculum materials donating approximately $25 thousand to provide 9,206 student workbooks, along with teacher guides and complimentary digital programs. Additionally, the Corporation provided $400 thousand in Educational Improvement Tax Credit Program scholarships, and approximately $24 thousand in academic scholarships in service to the communities in which it operates. New in 2023, the Corporation had the opportunity to educate its clients and employees on financial literacy topics during Financial Literacy Month through an interactive trivia contest and social media. Further, the Corporation offered a virtual summer financial literacy series, reaching each of its geographic markets on topics such as budgeting, credit, fraud, and basic investing. The Corporation also launched a virtual first-time home buyer series to teach the financial basics of buying your first home. All external sessions were made available to employees.
The Corporation continued to focus on increasing its outreach to those who have been traditionally underserved by the financial institution industry. Examples of some the Corporation’s key recent initiatives are outlined below.
Impressia Bank (“Impressia”) launched in May 2023 and is the sixth bank division of the Bank, and is dedicated to the professional and financial development and advancement of women business owners and leaders. Impressia's digital-centric approach is complemented by regional relationship managers and support managers, as well as specialized services such as SBA and grant advisory services, treasury management, wealth management, and private banking. Impressia is headquartered out of Buffalo, New York, with direct representation in the Corporation's market offices in Columbus and Cleveland, Ohio, and Erie and State College, Pennsylvania. As part of the CNB Bank family of banks, Impressia clients have access to more than 51 full-service offices throughout Pennsylvania, Ohio, New York, and Virginia. Built from the ground up by a Steering Committee of experts in financial services and entrepreneurship, a key element of Impressia’s mission is to close the gender gap in funding support and full access to banking services for women. Impressia provides clients with innovative resources and redefines the banker/client relationship. Impressia’s sophisticated suite of products and services helps women to navigate the complex landscape of business financing, which traditionally favored male entrepreneurs and often overlooked the unique circumstances and requirements of women-owned businesses. By empowering women in business, it is the goal of Impressia Bank to unleash a significant source of untapped potential, fostering innovation, entrepreneurship, and economic stability in the process.
BankOnWheels, which began services in the fourth quarter of 2022, is an innovative new banking experience, making full-service banking accessible to more consumers and small businesses, particularly those in underserved communities, through a banking unit built on a mobile-home-like commercial trucking chassis. The first of its kind operated by any financial institution in Western New York, BankOnWheels is a full-service, yet fully mobile bank branch, which will enable the Bank to deliver essential banking services to communities with little or no access to such services today. The BankOnWheels rotates between four locations in the cities of Buffalo and Niagara Falls, which are located in communities underserved by banks.
In May 2023, CNB Bank announced the launch of the At-Ease Program, a customized suite of products and solutions designed specifically for veterans and active members of the armed forces and their families. The At-Ease program is a testament to the Bank's commitment to the men and women who have served and continue to serve. Designed to make banking easier and more convenient for those who have served, the At-Ease program includes a variety of benefits for veterans, members of the armed forces, and their families. These benefits include international transaction fees refunded, waived out-of-network ATM, currency exchange, and international statement fees, as well as free cashier's checks and money orders, and mobile and online banking.
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In February 2024, ERIEBANK, a division of the Bank, broke ground on a new community banking office and financial education center on Parade Street in Erie, Pennsylvania as part of the ongoing revitalization effort led by Erie’s East Side Renaissance organization. Once this new office is completed, ERIEBANK employees will bring financial education and accessible banking to the community in an ongoing effort to bring needed resources to the area. In support of this endeavor, ERIEBANK has formed a community advisory committee, comprised of local stakeholders who are working in partnership with ERIEBANK to ensure that the financial and educational needs of the community are being met.
Available Information
The Corporation makes available free of charge on its website (www.cnbbank.bank) its Annual Report on Form 10-K, its quarterly reports on Form 10-Q, current reports on Form 8-K, and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended, as soon as practicable after it electronically files such material with, or furnishes it to, the SEC. Information on the Corporation’s website is not incorporated by reference into this report.
Shareholders may obtain a copy of the Corporation’s Annual Report on Form 10-K free of charge by writing to: CNB Financial Corporation, 1 South Second Street, PO Box 42, Clearfield, PA 16830, Attn: Shareholder Relations.
The SEC maintains an internet site that contains reports, proxy statements and other information about electronic filers such as the Corporation. The site is available at http://www.sec.gov.
ITEM 1A. RISK FACTORS
The Corporation’s financial condition and results of operations are subject to various risks inherent in its business. The material risks and uncertainties that management believes affect the Corporation are described below. If any of these risks actually occur, the Corporation’s business, financial condition, liquidity, results of operations and prospects could be materially and adversely affected. The following risks together with all of the other information in this Annual Report on Form 10-K should be considered.
Economic Risks
Economic conditions could adversely affect our business and financial results.
The Corporation’s financial condition and results of operations are impacted by global markets and economic conditions over which the Corporation has no control. Inflation has significantly increased since the start of 2021 and continues to remain at elevated levels compared to recent years prior to 2021, which has led to increased costs for businesses and consumers. An economic downturn or recession, including deterioration in the economic conditions in the U.S., or a slowing or stalled recovery therefrom, may have a material adverse effect on our business, financial condition or results of operations. Poor economic conditions have in the past adversely affected, and may in the future affect, the demand for the Corporation’s products, the creditworthiness of the Corporation’s borrowers and the value of the Corporation’s investment securities and other interest-earning assets. In particular, the Corporation may face the following risks in connection with the economic or market environment:
•The Corporation’s and the Bank’s ability to borrow from other financial institutions or to access the debt or equity capital markets on favorable terms or at all could be adversely affected by disruptions in the capital markets or other events, including actions by rating agencies and deteriorating investor expectations.
•The Corporation faces increased regulation of the banking and financial services industry. Compliance with such regulation may increase its costs and limit its ability to pursue business opportunities.
•Market developments may affect customer confidence levels and may cause increases in loan delinquencies and default rates, which management expects would adversely impact the Bank’s charge-offs and provision for credit losses.
•Market developments may adversely affect the Bank’s securities portfolio by causing other-than-temporary-impairments, prompting write-downs and securities losses.
•Competition in the banking and financial services industry could intensify as a result of the consolidation of financial services companies in connection with current market conditions.
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The Corporation may not be able to meet its cash flow needs on a timely basis at a reasonable cost, and the Corporation’s cost of funds for banking operations may significantly increase as a result of general economic conditions, interest rates and competitive pressures.
Liquidity is the ability to meet cash flow obligations as they come due and cash flow needs on a timely basis and at a reasonable cost. The liquidity of the Bank is used to make loans and to repay deposit and borrowing liabilities as they become due, or are demanded by customers and creditors. Many factors affect the Bank’s ability to meet liquidity needs, including variations in the markets served by its network of offices, its mix of assets and liabilities, reputation and standing in the marketplace, and general economic conditions.
The Bank’s primary source of funding is customer deposits, gathered throughout its network of banking offices. Periodically, the Corporation utilizes term borrowings from the Federal Home Loan Bank (the "FHLB") of Pittsburgh, of which the Bank is a member, and other lenders to meet funding obligations. In addition, the Bank also maintains borrowing capacity with the Federal Reserve Bank of Philadelphia. The Bank’s securities and loan portfolios provide a source of contingent liquidity that could be accessed in a reasonable time period through sales.
Significant changes in general economic conditions, market interest rates, competitive pressures or otherwise, could cause the Bank’s deposits to decrease relative to overall banking operations, and it would have to rely more heavily on brokered funds and borrowings in the future, which are typically more expensive than deposits.
The Corporation's management and Board of Directors, through the Asset-Liability Committee (the "ALCO"), monitor liquidity and the ALCO establishes and monitors acceptable liquidity ranges. The Bank actively manages its liquidity position through target ratios. Continual monitoring of these ratios, both historical and through forecasts under multiple rate scenarios, allows the Bank to employ strategies necessary to maintain adequate liquidity.
Changes in economic conditions, including consumer savings habits and availability of or access to capital, could potentially have a significant impact on the Bank’s liquidity position, which in turn could materially impact the Corporation’s financial condition, results of operations and cash flows.
Credit and Interest Rate Risks
The Bank’s allowance for credit losses may not be adequate to cover loan losses which could have a material adverse effect on the Corporation’s business, financial condition and results of operations.
A significant source of risk for the Corporation arises from the possibility that losses will be sustained because borrowers, guarantors and related parties may fail to perform in accordance with the terms of their loan agreements. Most loans originated by the Bank are secured, but some loans are unsecured based upon management’s evaluation of the creditworthiness of the borrowers. With respect to secured loans, the collateral securing the repayment of these loans principally includes a wide variety of real estate, and to a lesser extent commercial and personal property, either of which may be insufficient to cover the obligations owed under such loans.
Collateral values and the financial performance of borrowers may be adversely affected by changes in prevailing economic, environmental and other conditions, including declines in the value of real estate, changes in interest rates and debt service levels, changes in oil and gas prices, changes in monetary and fiscal policies of the federal government, widespread disease, terrorist activity, environmental contamination and other external events, which are beyond the control of the Bank. In addition, collateral appraisals that are out of date or that do not meet industry recognized standards might create the impression that a loan is adequately collateralized when in fact it is not. Although the Bank may acquire any real estate or other assets that secure defaulted loans through foreclosures or other similar remedies, the amounts owed under the defaulted loans may exceed the value of the assets acquired.
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The allowance for credit losses is subject to a formal analysis by the Credit Administration and Finance Departments of the Corporation. Following the issuance by the Financial Accounting Standards Board ("FASB") of Accounting Standards Update ("ASU") 2016-13, "Measurement of Credit Losses on Financial Instruments," the Corporation adjusted its loan allowance methodology to reflect the new standard, which requires periodic estimates of lifetime expected credit losses on financial assets and categorizes expected credit losses as allowances for credit losses under the current expected credit loss ("CECL") methodology. The Corporation measures expected credit losses of financial assets on a collective (pool) basis, when the financial assets share similar risk characteristics. Depending on the nature of the pool of financial assets with similar risk characteristics, the models utilized by the Corporation to estimate expected credit losses include a discounted cash flow ("DCF") model that discounts instrument-level contractual cash flows, adjusted for prepayments and curtailments, incorporating loss expectations, and a weighted average remaining maturity model which contemplates expected losses at a pool-level, utilizing historic loss information. The Corporation's models for estimating the allowance for credit losses consider available relevant information about the collectability of cash flows, including information about past events, current conditions, and reasonable and supportable forecasts.
The Bank monitors delinquencies and losses on a monthly basis. The Bank has adopted underwriting and credit monitoring policies and procedures, including the review of borrower financial statements and collateral appraisals, which management believes are appropriate to mitigate the risk of loss by assessing the likelihood of borrower nonperformance and the value of available collateral. The Bank also manages credit risk by diversifying its loan portfolio. An ongoing independent review, subsequent to management’s review, of individual credits is performed by an independent loan review function, which reports to the Loan Committee of the Corporation’s Board of Directors.
The determination of the appropriate level of the allowance for credit losses inherently involves a high degree of subjectivity and requires the Corporation to make significant estimates of current credit risks and future trends, all of which may undergo material changes. Although management believes that the processes in place for assessing the appropriate level of the allowance for credit losses are robust, such policies and procedures have limitations, including judgment errors in management’s risk analysis, and may not prevent unexpected losses in the future. Moreover, the CECL methodology may create more volatility in the level of our allowance for credit losses from quarter to quarter as changes in the level of allowance for credit losses will be dependent upon, among other things, macroeconomic forecasts and conditions, loan portfolio volumes and credit quality. These factors could have a material adverse effect on the Corporation’s business, financial condition and results of operations.
Interest rate volatility could significantly reduce the Corporation’s profitability.
The Corporation’s earnings largely depend on the relationship between the yield on its earning assets, primarily loans and investment securities, and the cost of funds, primarily deposits and borrowings. This relationship, commonly known as the net interest margin, is susceptible to significant fluctuation and is affected by economic and competitive factors that influence the yields and rates, and the volume and mix of the Bank’s interest earning assets and interest bearing liabilities.
Interest rate risk can be defined as the sensitivity of net interest income and of the market value of financial instruments to the direction and frequency of changes in interest rates. Interest rate risk arises from the imbalance in the re-pricing, maturity, and/or cash flow characteristics of assets and liabilities. The Corporation is subject to interest rate risk to the degree that its interest bearing liabilities re-price or mature more slowly or more rapidly or on a different basis than its interest earning assets. Changes in interest rates, including those due to federal monetary policy, will affect the levels of income and expense recorded on a large portion of the Bank’s assets and liabilities, and fluctuations in interest rates will impact the market value of all interest sensitive assets. Significant fluctuations in interest rates could have a material adverse impact on the Corporation’s business, financial condition, results of operations, or liquidity.
In response to high inflation, the Federal Reserve significantly increased the benchmark federal funds rate since early 2022. These actions have significantly increased interest rates. As interest rates rise, we experience competitive pressures to increase the rates we pay on deposits, which may decrease our net interest income. Furthermore, these increases in interest rates increase our cost of new debt or preferred capital.
The Bank’s interest rate risk measurement and management techniques incorporate the re-pricing and cash flow attributes of its balance sheet and off-balance sheet instruments as they relate to current and potential changes in interest rates. The level of interest rate risk, measured in terms of the potential future effect on earnings, is determined through the use of static gap analysis and earnings simulation modeling under multiple interest rate scenarios. Management’s objectives are to measure, monitor, and develop strategies in response to the interest rate risk profile inherent in the Bank’s balance sheet in order to preserve the sensitivity of net interest income to actual or potential changes in interest rates. For further information on risk relating to interest rates, refer to Part I, Item 7a, "Quantitative and Qualitative Disclosures about Market Risk," herein.
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The Corporation’s investment securities portfolio is subject to credit risk, market risk, and liquidity risk, and declines in value in its investment securities portfolio may require it to record impairment charges that could have a material adverse effect on its results of operations and financial condition.
The Corporation’s investment securities portfolio has risks beyond its control that can significantly influence the portfolio’s fair value. These factors include, but are not limited to, changes in interest rates, changes in prepayment speeds, changes in general economic conditions, rating agency downgrades of the securities, defaults of the issuers of the securities and market liquidity. Any change in current accounting principles or interpretations of these principles could impact the Corporation’s assessment of fair value and thus its determination of other-than-temporary impairment of the securities in its investment securities portfolio.
The Bank may be required to record other-than-temporary impairment charges on its investment securities if they suffer declines in value that are considered other-than-temporary. Numerous factors, including collateral deterioration underlying certain private label mortgage-backed securities, lack of liquidity for re-sales of certain investment securities, absence of reliable pricing information for certain investment securities, adverse changes in business climate, adverse actions by regulators, or unanticipated changes in the competitive environment could negatively affect the Bank’s securities portfolio in future periods. An other-than-temporary impairment charge could have a material adverse effect on the Corporation’s results of operations and financial condition.
A substantial decline in the value of the Bank’s FHLB common stock may adversely affect the Corporation’s results of operations, liquidity and financial condition.
As a requirement of membership in the FHLB of Pittsburgh, the Bank must own a minimum required amount of FHLB stock, calculated periodically based primarily on its level of borrowings from the FHLB. Borrowings from the FHLB represent the Bank’s primary source of short-term and long-term wholesale funding.
In an extreme situation, it is possible that the capitalization of an FHLB, including the FHLB of Pittsburgh, could be substantially diminished or reduced to zero. Consequently, given that there is no trading market for the Bank’s FHLB common stock, the Corporation’s management believes that there is a risk that the Corporation’s investment could be deemed impaired at some time in the future. If this occurs, it may adversely affect the Corporation’s results of operations and financial condition.
If the capitalization of the FHLB of Pittsburgh is substantially diminished, the Bank’s liquidity may be adversely impacted if it is not able to obtain alternative sources of funding.
There are 11 FHLB banks, including the FHLB of Pittsburgh, in the FHLB system. The 11 FHLB banks are jointly liable for the consolidated obligations of the FHLB system. To the extent that one FHLB bank cannot meet its obligations to pay its share of the system’s debt, other FHLB banks can be called upon to make the payment. The Corporation cannot assure you, however, that the FHLB system will be able to meet these obligations.
The Bank could be held responsible for environmental liabilities relating to properties acquired through foreclosure, resulting in significant financial loss.
In the event the Bank forecloses on a defaulted commercial or residential mortgage loan to recover its investment, it may be subject to environmental liabilities in connection with the underlying real property, which could significantly exceed the value of the real property. Although the Bank exercises due diligence to discover potential environmental liabilities prior to acquiring any property through foreclosure, hazardous substances or wastes, contaminants, pollutants, or their sources may be discovered on properties during its ownership or after a sale to a third party. The Corporation cannot assure you that the Bank would not incur full recourse liability for the entire cost of any removal and cleanup on an acquired property, that the cost of removal and cleanup would not exceed the value of the property, or that the Bank could recover any of the costs from any third party. Losses arising from environmental liabilities could have a material adverse impact on the Corporation’s business, financial condition, results of operations, or liquidity.
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Replacement of the LIBOR benchmark interest rate could adversely affect our business, financial condition, and results of operations.
In March 2021, the United Kingdom’s Financing Conduct Authority and the Intercontinental Exchange Benchmark Administration, the administrator for the London Interbank Offered Rate (“LIBOR”), concurrently announced that certain settings of LIBOR would no longer be published on a representative basis after December 31, 2021, and the most commonly used U.S. dollar LIBOR settings would no longer be published on a representative basis after June 30, 2023. The Federal Reserve Board and the Federal Reserve Bank of New York organized the Alternative Reference Rates Committee, which identified the Secured Overnight Financing Rate ("SOFR") as its preferred alternative to LIBOR in derivatives and other financial contracts.
We have a number of loans, derivative contracts, borrowings, and other financial instruments with attributes that are either directly or indirectly dependent on LIBOR. With the transition from LIBOR to SOFR as the preferred alternative to LIBOR, we have transitioned and amended our contracts and financial instruments to reference the SOFR rate where required. Since proposed alternative rates (including SOFR) are calculated differently, payments under contracts referencing new rates will differ from those referencing LIBOR. The future performance of SOFR, including how changes in SOFR rates may differ from other rates during different economic conditions, cannot be predicted based on the limited historical performance. Further, we cannot predict how SOFR will perform in comparison to LIBOR in changing market conditions, what the effect of such rate’s implementation may be on the markets for floating-rate financial instruments or whether such rates will be vulnerable to manipulation. The transition will change our market risk profiles, requiring changes to risk and pricing models, valuation tools, product design, and hedging strategies. Furthermore, failure to adequately manage this transition process with our customers could adversely impact our reputation and could have a material adverse effect on our business, financial condition and results of operations.
Risks Related to an Investment in the Corporation’s Securities
Some provisions contained in the Corporation’s articles of incorporation and its bylaws and under Pennsylvania law could deter a takeover attempt or delay changes in control or management of the Corporation.
Certain anti-takeover provisions of the Pennsylvania Business Corporation Law of 1988, as amended, apply to Pennsylvania registered corporations (e.g., publicly traded companies) including, but not limited to, those relating to (1) control share acquisitions, (2) disgorgement of profits by certain controlling persons, (3) business combination transactions with interested shareholders, and (4) the rights of shareholders to demand fair value for their stock following a control transaction. Pennsylvania law permits corporations to opt-out of these anti-takeover provisions, but the Corporation has not done so. Such provisions could have the effect of deterring takeovers or delaying changes in control or management of the Corporation. Additionally, such provisions could limit the price that some investors might be willing to pay in the future for shares of the Corporation’s common stock.
For example, the Corporation’s amended and restated articles of incorporation require the affirmative vote of 66% of the outstanding shares entitled to vote to effect a business combination. In addition, the Corporation’s amended and restated articles of incorporation, subject to the limitations prescribed in such articles and subject to limitations prescribed by Pennsylvania law, authorize the Corporation’s Board of Directors, from time to time by resolution and without further shareholder action, to provide for the issuance of shares of preferred stock, in one or more series, and to fix the designation, powers, preferences and other rights of the shares and to fix the qualifications, limitations and restrictions thereof. As a result of its broad discretion with respect to the creation and issuance of preferred stock without shareholder approval, the Corporation's Board of Directors could adversely affect the voting power and other rights of the holders of common stock and, by issuing shares of preferred stock with certain voting, conversion and/or redemption rights, could discourage any attempt to obtain control of the Corporation.
The Corporation’s bylaws, as amended and restated, provide for the division of the Corporation’s Board of Directors into three classes of directors, with each serving staggered terms. In addition, any amendment to the Corporation’s bylaws must be approved by the affirmative vote of a majority of the votes cast by all shareholders entitled to vote thereon and, if any shareholders are entitled to vote thereon as a class, upon receiving the affirmative vote of a majority of the votes cast by the shareholders entitled to vote as a class.
Any of the foregoing provisions may have the effect of deterring takeovers or delaying changes in control or management of the Corporation.
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The price of the Corporation’s common stock may fluctuate significantly, and this may make it difficult for you to resell shares of common stock owned by you at times or at prices you find attractive.
The price of the Corporation’s common stock on the Global Select Market of The NASDAQ Stock Market LLC ("NASDAQ") constantly changes. The Corporation expects that the market price of its common stock will continue to fluctuate, and the Corporation cannot give you any assurances regarding any trends in the market prices for its common stock.
The Corporation’s stock price may fluctuate as a result of a variety of factors, many of which are beyond its control. These factors include the Corporation’s:
•past and future dividend practice;
•financial condition, performance, creditworthiness, and prospects;
•quarterly variations in the Corporation’s operating results or the quality of the Corporation’s assets;
•operating results that vary from the expectations of management, securities analysts, and investors;
•changes in expectations as to the Corporation’s future financial performance;
•announcements of innovations, new products, strategic developments, significant contracts, acquisitions, and other material events by the Corporation or its competitors;
•the operating and securities price performance of other companies that investors believe are comparable to the Corporation;
•future sales of the Corporation’s equity or equity-related securities;
•the credit, mortgage and housing markets, the markets for securities relating to mortgages or housing, and developments with respect to financial institutions generally; and
•instability in global financial markets and global economies and general market conditions, such as interest or foreign exchange rates, stock, commodity or real estate valuations or volatility, budget deficits or sovereign debt level concerns and other geopolitical, regulatory or judicial events.
The Corporation’s ability to pay dividends is limited by law and regulations.
The future declaration of dividends by the Corporation’s Board of Directors will depend on a number of factors, including capital requirements, regulatory limitations, the Corporation’s operating results and financial condition and general economic conditions. As a bank holding company, the Corporation’s principal assets and sources of income are derived from the Bank and, as a result, the Corporation’s ability to pay dividends depends primarily on the receipt of dividends from the Bank. Dividend payments from the Bank are subject to legal and regulatory limitations, generally based on retained earnings, imposed by bank regulatory agencies. The ability of the Bank to pay dividends is also subject to financial condition, regulatory capital requirements, capital expenditures, and other cash flow requirements. The Corporation cannot assure you that the Bank will be able to pay dividends to the Corporation in the future. If the Corporation were unable to receive dividends from the Bank, it would materially and adversely affects the Corporation’s liquidity and its ability to service its debt, pay its other obligations, or pay cash dividends on its common stock. The Corporation may decide to limit the payment of dividends to its stockholders even when the Corporation has the legal ability to pay them in order to retain earnings for use in the Corporation’s business.
Operational and Strategic Risks
The Bank’s loans are principally concentrated in certain areas of Pennsylvania, Ohio, New York and Virginia, and adverse economic conditions in those markets could adversely affect the Corporation’s business, financial condition and results of operations.
The Corporation’s success is dependent to a significant extent upon general economic conditions in the United States and, in particular, the local economies in Central and Northwest Pennsylvania, Central and Northeast Ohio, Western New York and Southwest Virginia - the primary markets served by the Bank. The Bank is particularly exposed to real estate and economic factors in these geographic areas, as most of its loan portfolio is concentrated among borrowers in these markets. Furthermore, because a substantial portion of the Bank’s loan portfolio is secured by real estate in these areas, the value of the associated collateral is also subject to regional real estate market conditions.
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The Bank is not immune to negative consequences arising from overall economic weakness and, in particular, a sharp downturn in the local real estate markets served by the Bank. While the Bank’s loan portfolio has not shown significant signs of credit quality deterioration despite continued challenges in the U.S. economy, we cannot assure you that no deterioration will occur. An economic recession in the markets served by the Bank, and the nation as a whole, could negatively impact household and corporate incomes. This impact could lead to decreased loan demand and increase the number of borrowers who fail to pay the Bank interest or principal on their loans, and accordingly, could have a material adverse effect on the Corporation’s business, financial condition, results of operations, or liquidity.
Severe weather, flooding and other effects of climate change and other natural disasters, such as earthquakes, could adversely affect our financial condition, results of operations or liquidity.
Our branch locations and our customers’ properties may be adversely impacted by flooding, wildfires, prolonged periods of extreme temperature, high winds and other effects of severe weather conditions that may be caused or exacerbated by climate change. These events can force property closures, result in property damage and/or result in delays in expansion, development or renovation of our properties and those of our customers. Even if these events do not directly impact our properties or our customers’ properties, they may impact us and our customers through increased insurance, energy or other costs. In addition, changes in laws or regulations, including federal, state or city laws, relating to climate change could result in increased capital expenditures to improve the energy efficiency of our branch locations and/or our customers’ properties. We also face investor-related climate risks. Investors are increasingly taking into account environmental, social, and governance factors, including climate risks, in determining whether to invest in companies. Our reputation and investor relationships could be damaged as a result of our involvement with activities perceived to be causing or exacerbating climate change, as well as any decisions we make to continue to conduct or change our activities in response to considerations relating to climate change.
The Corporation depends on the accuracy and completeness of information about customers and counterparties.
In deciding whether to extend credit or enter into other transactions with customers and counterparties, we rely on information furnished to us by or on behalf of customers and counterparties, including financial statements and other financial information. We also rely on representations of customers and counterparties as to the accuracy and completeness of that information and, with respect to financial statements, on reports of independent auditors. For example, in deciding whether to extend credit to clients, we may assume that a customer's audited financial statements conform to U.S. generally accepted accounting principles ("GAAP") and present fairly, in all material respects, the financial condition, results of operations and cash flows of the customer. Our earnings are significantly affected by our ability to properly originate, underwrite and service loans. Our financial condition, results of operations and capital could be negatively impacted to the extent we incorrectly assess the creditworthiness of our borrowers, fail to detect or respond to deterioration in asset quality in a timely manner, or rely on financial statements that do not comply with GAAP or are materially misleading.
The risks presented by acquisitions could adversely affect our financial condition and results of operations.
Any acquisitions will be accompanied by the risks commonly encountered in acquisitions including, among other things: our ability to realize anticipated cost savings and avoid unanticipated costs relating to the merger, the difficulty of integrating operations and personnel, the potential disruption of our or the acquired company’s ongoing business, the inability of our management to maximize our financial and strategic position, the inability to maintain uniform standards, controls, procedures and policies, and the impairment of relationships with the acquired company’s employees and customers as a result of changes in ownership and management. These risks may prevent the Corporation from fully realizing the anticipated benefits of an acquisition or cause the realization of such benefits to take longer than expected.
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Strong competition within the Corporation’s markets and technological change may have a material adverse impact on its profitability.
The Corporation competes with an ever-increasing array of financial service providers. As noted above, as a financial holding company and state-chartered financial institution, respectively, the Corporation and the Bank are subject to extensive regulation and supervision, including, in many cases, regulations that limit the type and scope of activities. The non-bank financial service providers that compete with the Corporation and the Bank may not be subject to such extensive regulation, supervision, and tax burden. Competition from nationwide banks, as well as local institutions, is strong in the Corporation’s markets.
The financial services industry is undergoing rapid technological change and technological advances are likely to intensify competition. In addition to improving customer services, effective use of technology increases efficiency and enables financial institutions to reduce costs. Accordingly, the Corporation’s future success will depend in part on its ability to address customer needs by using technology. The Corporation cannot assure you that it will be able to successfully take advantage of technological changes or advances or develop and market new technology driven products and services to its customers. Failure to keep pace with technological change affecting the financial services industry could have a material adverse effect on the Corporation's financial condition, results of operations, or liquidity.
Many regional, national, and international competitors have far greater assets and capitalization than the Corporation has and greater resources to invest in technology and access to capital markets and can consequently offer a broader array of financial services than the Corporation can. We cannot assure you that we will continue to be able to compete effectively with other financial institutions in the future. Developments increasing the nature or level of competition could have a material adverse effect on the Corporation’s business, financial condition, results of operations, or liquidity. For further information on competition, refer to Part I, Item 1, "Competition," herein.
The soundness of other financial institutions with which the Corporation does business could adversely affect the Corporation’s business, financial condition or results of operations.
Our ability to engage in routine funding transactions could be adversely affected by the actions and commercial soundness of other financial institutions. Financial institutions are interrelated as a result of trading, clearing, counterparty, investment or other relationships. The Corporation routinely executes transactions with counterparties in the financial services industry such as commercial banks, brokers and dealers, investment banks and other institutional clients for a range of transactions including loan participations, derivatives, and hedging transactions. In addition, the Corporation invests in securities or loans originated or issued by financial institutions or supported by the loans they originate. As a result, defaults by, or even rumors or questions about, one or more financial institutions, or the financial industry generally, have led to, or could in the future lead to, market-wide liquidity problems and could lead to losses or defaults by us or other institutions. Many of these transactions expose the Corporation to credit or investment risk in the event of default by the Corporation’s counterparty. In addition, the Corporation’s credit risk may be exacerbated if the collateral it holds cannot be realized or is liquidated at prices not sufficient to recover the full amount of the loan or other exposure to the Corporation. The Corporation could incur losses to its securities portfolio as a result of these issues. These types of losses may have a material adverse effect on the Corporation’s business, financial condition or results of operation.
The Corporation’s operations may be adversely affected if its external vendors do not perform as expected or if its access to third-party services is interrupted.
The Corporation relies on certain external vendors to provide products and services necessary to maintain the day-to-day operations of the Corporation. Some of the products and services provided by vendors include key components of our business infrastructure including data processing and storage and internet connections and network access, among other products and services. Accordingly, the Corporation’s operations are exposed to the risk that these vendors will not perform in accordance with the contracted arrangements or under service level agreements. The failure of an external vendor to perform in accordance with the contracted arrangements or under service level agreements, because of changes in the vendor’s organizational structure, financial condition, support for existing products and services or strategic focus or for any other reason, could disrupt the Corporation’s operations. If we are unable to find alternative sources for our vendors’ services and products quickly and cost-effectively, the failures of our vendors could have a material adverse impact on the Corporation’s business and, in turn, the Corporation’s financial condition and results of operations.
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Additionally, our information technology and telecommunications systems interface with and depend on third-party systems, and we could experience service denials if demand for such services exceeds capacity or such third-party systems fail or experience interruptions. If sustained or repeated, a system failure or service denial could result in a deterioration of our ability to process new and renewal loans, gather deposits and provide customer service, compromise our ability to operate effectively, damage our reputation, result in a loss of customer business and subject us to additional regulatory scrutiny and possible financial liability, any of which could have a material adverse effect on our financial condition and results of operations.
A failure in or breach of the Corporation’s or any of its subsidiaries’ information technology network and systems, or those of third party vendors and other service providers, including as a result of cyber attacks, could disrupt the Corporation’s or any of its subsidiaries’ businesses, result in the unauthorized disclosure or misuse of confidential or proprietary information, damage its reputation, increase its costs, or cause losses.
The Corporation, primarily through the Bank, depends on its information technology networks and systems to continuously process, record and monitor a large number of customer transactions and to process, transmit and store proprietary and confidential information, including personal information of employees and customers. Accordingly, the Corporation’s and its subsidiaries’ information technology networks and systems must continue to be safeguarded and monitored for potential failures, vulnerabilities, disruptions and breakdowns. We face cybersecurity threats, including system, network or internet failures, cyber-attacks, ransomware and other malware, social engineering, phishing schemes and workforce member error, negligence, or fraud. Although the Corporation has business continuity plans and other safeguards in place, any such cybersecurity incident, including those impacting personal information, could result in customer attrition, regulatory fines, penalties or intervention, reputational damage, reimbursement or other compensation costs, and/or additional compliance costs, any of which could materially adversely affect the Corporation’s results of operations or financial condition. Furthermore, increased regulation of data collection, use and retention practices, including self-regulation and industry standards, changes in existing laws and regulations, enactment of new laws and regulations, increased enforcement activity, and changes in interpretation of laws, could increase our cost of compliance and operation, limit our ability to grow our business or otherwise harm the Corporation.
In addition, significant disruptions of our third party vendors’ and/or service providers’ security systems or infrastructure, or other similar data security incidents, could adversely affect our business operations and/or result in the loss, misappropriation, and/or unauthorized access, use or disclosure of, or the prevention of access to, regulated personal or confidential information, which could harm our business. While we may be entitled to damages if our third party service providers fail to satisfy their security-related obligations to us, any award may be insufficient to cover our damages, or we may be unable to recover such award.
Although to date the Corporation has not experienced any material losses relating to cyber attacks or cybersecurity incidents, there can be no assurance that it or its subsidiaries will not suffer such losses in the future and our information systems remain a target of cyber attacks. Given the evolving nature of security threats and evolving safeguards, there can be no assurance that any preventive, protective, or remedial data security measures that we or our third party service providers implement are or will be adequate to detect or prevent all cybersecurity incidents. Additionally, while we have implemented security measures that we believe are appropriate, a regulator could deem our security measures not to be appropriate given the lack of prescriptive measures in certain data protection laws. The Corporation continues to enhance its data security systems, technology platforms, employee education and risk management processes, in an effort to underpin its business strategy as well as in response to the evolving threat landscape and any incidents we experience. In connection with these efforts, we have incurred costs and expect to incur additional costs as we continue to enhance our data security infrastructure and take further steps to prevent unauthorized access to our systems and the data we maintain. In addition, any actual or perceived failure by the Corporation or our vendors or business partners to comply with our privacy, confidentiality, or data security-related legal or other obligations to third parties may result in claims by third parties that we have breached our privacy- or confidentiality-related obligations, which could materially and adversely affect our business and prospects.
The Corporation’s risk and exposure to these matters, including future "phishing" attempts like the 2020 incident, which was disclosed in the Corporation's Annual Form 10-K for the year ended December 31, 2020, remain heightened because of, among other things, the evolving nature of these threats, our plans to continue to implement our Internet banking and mobile banking channel strategies and develop additional remote connectivity solutions to serve our customers when and how they want to be served. As a result, cybersecurity and the continued development and enhancement of the Corporation’s controls, processes and practices designed to protect its and its subsidiaries systems, computers, software, data and networks from attack, damage or unauthorized access remain a priority for the Corporation. As cyber threats continue to evolve, the Corporation may be required to expend further significant resources to continue to modify or enhance its protective measures or to investigate and remediate future information security vulnerabilities.
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While we have purchased cybersecurity insurance, there are no assurances that the coverage would be adequate in relation to any incurred losses. Moreover, as cyber attacks increase in frequency and magnitude, we may be unable to obtain cybersecurity insurance in amounts and on terms we view as adequate for our operations. Further information relating to cybersecurity risk management is discussed in Item 1C. “Cybersecurity” of this report.
A pandemic and measures intended to prevent its spread, could have a material adverse effect on our business, results of operations, cash flows, and financial condition.
A pandemic, such as the COVID-19 pandemic, and emergence of new variants could negatively impact the global economy, disrupt financial markets and international trade, and result in varying unemployment levels, all of which could negatively impact our business, results of operations, cash flows, and financial condition. Pandemic outbreaks could lead (and the outbreak of COVID-19 led) governments and other authorities around the world, including federal, state and local authorities in the United States, to impose measures intended to mitigate its spread, including restrictions on freedom of movement and business operations such as issuing guidelines, travel bans, border closings, business closures and quarantine orders.
Our business and financial performance could be adversely affected, directly or indirectly, by terrorist activities, international hostilities or domestic civil unrest.
Neither the occurrence nor the potential impact of geopolitical instabilities, terrorist activities, international hostilities or other extraordinary events beyond the Corporation’s control can be predicted. However, these occurrences could adversely impact us, for example, by preventing us from conducting our business in the ordinary course. Also, their impact on our borrowers, depositors, other customers, suppliers or other counterparties could result in indirect adverse effects on us. Other indirect adverse consequences from these occurrences could result from impacts to the financial markets, the economy in general or in any region, or key parts of the infrastructure (such as the power grid) on which we and our customers rely. These types of indirect effects, whether specific to our counterparties or more generally applicable, could lead, for example, to an increase in delinquencies, bankruptcies or defaults that could result in the Corporation experiencing higher levels of nonperforming assets, net charge-offs and provisions for credit losses. They could also cause a reduction in demand for lending or other services that we provide.
Risks Related to Legal and Compliance Matters
The Corporation is subject to extensive government regulation and supervision, which may affect its ability to conduct its business and may negatively impact its financial results.
The Corporation, primarily through the Bank and its non-bank subsidiary, is subject to extensive federal and state regulation and supervision. Banking regulations are primarily intended to protect depositors’ funds, the Federal Deposit Insurance Fund and the safety and soundness of the banking system as a whole, not stockholders. These regulations affect the Corporation’s lending practices, capital structure, investment practices, dividend policy and growth, among other things. Congress and federal regulatory agencies continually review banking laws, regulations and policies for possible changes. Changes to statutes, regulations or regulatory policies, including changes in interpretation or implementation of statutes, regulations or policies, could affect the Corporation in substantial and unpredictable ways. Such changes could subject it to additional costs, limit the types of financial services and products the Corporation may offer, and/or limit the pricing it may charge on certain banking services, among other things.
Failure to comply with laws, including the Bank Secrecy Act and USA Patriot Act, regulations or policies could result in sanctions by regulatory agencies, restrictions, civil money penalties and/or reputation damage, which could have a material adverse effect on the Corporation’s business, financial condition and results of operations and/or cause the Corporation to lose its financial holding company status. While the Corporation has policies and procedures designed to prevent any such violations, there can be no assurance that such violations will not occur. See the section captioned "Supervision and Regulation" in Part I, Item 1 of this report for further information.
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Federal and state governments could pass legislation responsive to current credit conditions which could cause the Corporation to experience higher credit losses.
The Corporation could experience higher credit losses because of federal or state legislation or regulatory action that reduces the amount the Bank’s borrowers are otherwise contractually required to pay under existing loan contracts. Also, the Corporation could experience higher credit losses because of federal or state legislation or regulatory action that limits the Bank’s ability to foreclose on property or other collateral or makes foreclosure less economically feasible. The Corporation cannot assure you that future legislation will not significantly and adversely impact its ability to collect on its current loans or foreclose on collateral.
General Risk Factors
The Corporation relies on its management and other key personnel, and the loss of any of them may adversely affect its operations.
The Corporation is and will continue to be dependent upon the services of its executive management team. In addition, it will continue to depend on its ability to retain and recruit key client relationship managers. The unexpected loss of services of any key management personnel, or the inability to recruit and retain qualified personnel in the future, could have an adverse effect on its business and financial condition.
The Corporation's risk management framework may not be effective in mitigating risk and loss.
The Corporation maintains an enterprise risk management program that is designed to identify, quantify, monitor, report, and control the risks that it faces. These risks include, but are not limited to: strategic, interest-rate, credit, liquidity, operations, pricing, reputation, compliance, litigation, and cybersecurity. While the Corporation assesses and improves this program on an ongoing basis, there can be no assurance that its approach and framework for risk management and related controls will effectively mitigate all risk and limit losses in its business. If conditions or circumstances arise that expose flaws or gaps in the Corporation's risk-management program, or if its controls break down, the Corporation's results of operations and financial condition may be adversely affected.
ITEM 1B. UNRESOLVED STAFF COMMENTS
None.
ITEM 1C. CYBERSECURITY
Risk Management and Strategy
The Corporation maintains robust processes for assessing, identifying, and managing material risks from cybersecurity threats. The Corporation’s cybersecurity program is based on the Federal Financial Institutions Examination Council (“FFIEC”) framework which tailors the National Institute of Standards and Technology (“NIST”) Cybersecurity Framework to be more financial services focused. The risk of cybersecurity threats is integrated into its Enterprise Risk Management (“ERM”) program, led by the Corporation’s Chief Risk Officer. The ERM program includes an annual risk prioritization process to identify key enterprise risks. Each key risk is assigned a risk owner to establish action plans and implement risk mitigation strategies. The cybersecurity threat risk action plan is managed at the enterprise level by the Chief Information Technology & Security Officer (the “CITSO”), the VP of Information Technology, and the VP of Information Security. Each quarter, the risk owners review and update the cybersecurity threat risk action plan to provide the status on specific risk mitigation actions and to identify new threats. To oversee and identify cybersecurity threat risks on a day-to-day basis, including from third party service providers, the Corporation maintains a third-party security operations center with round-the-clock monitoring, and the CITSO receives regular reports on industry activity. Management also assesses the cybersecurity proficiency of potential third-party suppliers before utilizing their services. The assessment identifies cybersecurity-related risks and makes recommendations to enhance the security of all new computing services. The Corporation reassesses all suppliers on a regular interval.
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The Corporation works closely with its internal auditors to assess, identify, and manage cybersecurity risks. In addition, the Corporation engages with third party cybersecurity specialists to provide an independent assessment of the Corporation’s cybersecurity programs and to prepare a 3-year plan to maintain compliance and operational excellence. Management periodically reviews the 3-year plan and modifies it in response to changes in the threat landscape or otherwise as needed. Management has not identified risks from cybersecurity threats, including as a result of any previous cybersecurity incidents, that have materially affected or are reasonably likely to materially affect the Corporation, including its business strategy, results of operations or financial condition. See “Item 1A. Risk Factors” above for more information.
Governance
The Board of Directors is responsible for overseeing the assessment and management of enterprise-level risks that may impact the Corporation. The Audit Committee has primary responsibility for overseeing risk management, including oversight of risks from cybersecurity threats. Management, including the CITSO, reports on cybersecurity matters regularly to the Board, primarily through the Audit and IT Committees, including an annual report regarding specific risks and mitigation efforts within the Bank and a 3-year cybersecurity threat assessment conducted by third party experts. Management provides benchmarking information and updates on key operational and compliance metrics to the Board. In addition, cybersecurity training is provided to the full Board of Directors to educate directors on the current cyber threat environment and measures companies can take to mitigate risk and impact of cyber attacks.
The Corporation maintains a Cybersecurity Incident Response Plan (the “CSIRP”), which establishes an organizational framework and guidelines intended to facilitate an effective response and handling of cybersecurity incidents that could jeopardize the availability, integrity, or confidentiality of the Corporation’s assets. The CSIRP outlines roles and responsibilities, criteria for measuring the severity of a cybersecurity incident, and an escalation framework, including processes for informing the General Counsel and the Board of Directors of material cybersecurity incidents. As described above, management is actively involved in assessing and managing the Bank’s material cybersecurity risks. The CITSO and the VP of Information Security primarily lead these efforts. The CITSO, who reports directly to the CEO, is responsible for the oversight of the Corporation’s IT operation, including the cybersecurity program, and holds a Bachelor of Science degree in Information Technology and Security and a Master of Science in Information Security and Assurance. He also holds 20 industry recognized Technology and Security certifications. The VP of Information Security reports directly to the CITSO and has responsibility for leadership of the Bank’s cybersecurity program. He holds a bachelor’s degree in mathematics and computer science, as well as several industry recognized information security certifications.
ITEM 2. PROPERTIES
The headquarters of the Corporation and the Bank are located at 1 South Second Street, Clearfield, Pennsylvania, in a building owned by the Corporation. The Bank operates 51 full-service offices at December 31, 2023. Of these 51 offices, 24 are owned and 26 are leased from independent owners and one is leased from the Corporation. Holiday has nine full-service offices, of which eight are leased from independent owners and one is leased from the Corporation. The CNB Bank franchise's primary market areas are the Pennsylvania counties of Blair, Cambria, Centre, Clearfield, Elk, Indiana, Jefferson, and McKean. ERIEBANK, a division of the Bank, operates in the Pennsylvania counties of Crawford, Erie, and Warren and in the Ohio counties of Ashtabula, Cuyahoga, Geauga, Lake, and Lorain. FCBank, a division of the Bank, operates in the Ohio counties of Crawford, Delaware, Franklin, Knox, Marion, Morrow and Richland. BankOnBuffalo, a division of the Bank, operates in the New York counties of Erie and Niagara. Ridge View Bank, a division of the Bank, operates in the Virginia counties of Botetourt, Craig, Franklin, and Roanoke. Impressia Bank, a division of the Bank, operates in the Bank’s primary market areas. There are no encumbrances on the offices owned and the rental expense on the leased property is immaterial in relation to operating expenses. The initial lease terms range from two to twenty years.
ITEM 3. LEGAL PROCEEDINGS
There are no material pending legal proceedings to which the Corporation or any of its subsidiaries is a party, or of which any of their properties is the subject, except ordinary routine proceedings which are incidental to the business.
ITEM 4. MINE SAFETY DISCLOSURES
None.
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PART II.
ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES
Our common stock is traded on the Global Select Market of NASDAQ under the symbol "CCNE." As of December 31, 2023, the number of shareholders of record of the Corporation’s common stock was 7,184.
Dividends
As discussed under "The Corporation’s ability to pay dividends is limited by law and regulations" included in Item 1A. Risk Factors in Part I, the amount and timing of dividends is subject to the discretion of the Board of Directors and depends upon business conditions and regulatory requirements. The Board of Directors has the discretion to change the dividend at any time for any reason. The Board of Directors presently intends to continue the policy of paying quarterly cash dividends. The amount of any future dividends will depend on economic and market conditions, the Corporation's financial condition and operating results and other factors, including applicable government regulations and policies.
Issuer Purchases of Equity Securities
The following table provides information with respect to any purchase of shares of the Corporation’s common stock made by or on behalf of the Corporation for the quarter ended December 31, 2023.

Period | Total Number of Shares Purchased |  | Average Price Paid per Share |  | Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs |  | Maximum Number (or approximate dollar value) of Shares that May Yet Be Purchased Under the Plans or Programs (1)
October 1 – 31, 2023 | — |  |  | $ | — |  |  | — |  |  | 173,541 |
November 1 – 30, 2023 | — |  |  | — |  |  | — |  |  | 173,541 |
December 1 – 31, 2023 | — |  |  | — |  |  | — |  |  | 173,541 |

(1) On May 17, 2022, the Corporation's Board of Directors authorized a common stock repurchase plan (the "Repurchase Plan") pursuant to which the Corporation is authorized to repurchase up to 500,000 shares of common stock, provided that the aggregate purchase price of shares of common stock repurchased does not exceed $15 million. The repurchases of common stock, if any, were originally authorized to be made during the period beginning on June 2, 2022 (the date on which the Corporation received acknowledgement of the repurchase program from the Federal Reserve Bank) through and including May 17, 2023. On May 9, 2023, the Corporation's Board of Directors amended the Repurchase Plan to extend its duration to May 17, 2024. Common stock repurchases under the Repurchase Plan may be conducted through open market purchases or, privately negotiated transactions. Depending on market conditions and other factors, these repurchases may be commenced or suspended without prior notice. As of December 31, 2023, there were 173,541 shares remaining for repurchase under the program.
Additionally, during the quarter ended December 31, 2023, certain employees surrendered shares of common stock owned by them to satisfy their statutory minimum U.S. federal and state tax obligations associated with the vesting of shares of restricted common stock issued under the CNB Financial Corporation 2019 Omnibus Incentive Plan.
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Share Return Performance
Set forth below is a chart comparing the Corporation’s cumulative return to stockholders against the cumulative return of the NASDAQ Composite Index and a peer group index of banking organizations for the five-year period commencing December 31, 2018 and ending December 31, 2023.
CNB Financial Corporation

| Period Ending
Index | 12/31/18 | 12/31/19 | 12/31/20 | 12/31/21 | 12/31/22 | 12/31/23
CNB Financial Corporation | 100.00 |  | 145.93 |  | 98.38 |  | 125.89 |  | 116.13 |  | 114.26 |
NASDAQ Composite Index | 100.00 |  | 136.69 |  | 198.10 |  | 242.03 |  | 163.28 |  | 236.17 |
KBW NASDAQ Bank Index | 100.00 |  | 136.13 |  | 122.09 |  | 168.88 |  | 132.75 |  | 131.57 |

Source: S&P Global Market Intelligence
© 2024
ITEM 6. RESERVED
ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
This Management’s Discussion and Analysis of Financial Condition and Results of Operations is presented to provide insight into management’s assessment of financial results and should be read in conjunction with the following parts of this Annual Report on Form 10-K: Part I, Item 1 "Business," Part II, Item 7A, "Quantitative and Qualitative Disclosures About Market Risk," and Part II, Item 8 "Financial Statements and Supplementary Data." This section of this Annual Report on Form 10-K generally discusses 2023 and 2022 items and year-to-year comparisons between 2023 and 2022. Discussions of 2021 items and year-to-year comparisons between 2022 and 2021 that are not included in this Form 10-K can be found in "Management’s Discussion and Analysis of Financial Condition and Results of Operations" in Part II, Item 7 of the Corporation’s Annual Report on Form 10-K for the year ended December 31, 2022.
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Dollar amounts in tables are stated in thousands, except for per share amounts.
Forward-Looking Statements and Factors that Could Affect Future Results
The information below includes forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, with respect to CNB’s financial condition, liquidity, results of operations, future performance and business. These forward-looking statements are intended to be covered by the safe harbor for "forward-looking statements" provided by the Private Securities Litigation Reform Act of 1995. Forward-looking statements are those that are not historical facts. Forward-looking statements include statements with respect to beliefs, plans, objectives, goals, expectations, anticipations, estimates and intentions that are subject to significant risks and uncertainties and are subject to change based on various factors (some of which are beyond CNB’s control). Forward-looking statements often include the words "believes," "expects," "anticipates," "estimates," "forecasts," "intends," "plans," "targets," "potentially," "probably," "projects," "outlook" or similar expressions or future conditional verbs such as "may," "will," "should," "would" and "could." CNB’s actual results may differ materially from those contemplated by the forward-looking statements, which are neither statements of historical fact nor guarantees or assurances of future performance.
Such known and unknown risks, uncertainties and other factors that could cause the actual results to differ materially from the statements, include, but are not limited to, (i) adverse changes or conditions in capital and financial markets, including actual or potential stresses in the banking industry; (ii) changes in the interest rate environment; (iii) the credit risks of lending activities, including our ability to estimate credit losses and the allowance for credit losses, as well as the effects of changes in the level of, and trends in, loan delinquencies and write-offs; (iv) effectiveness of our data security controls in the face of cyber attacks and any reputational risks following a cybersecurity incident; (v) the duration and scope of a pandemic, and the local, national and global impact of a pandemic; (vi) changes in general business, industry or economic conditions or competition; (vii) changes in any applicable law, rule, regulation, policy, guideline or practice governing or affecting financial holding companies and their subsidiaries or with respect to tax or accounting principles or otherwise; (viii) higher than expected costs or other difficulties related to integration of combined or merged businesses; (ix) the effects of business combinations and other acquisition transactions, including the inability to realize our loan and investment portfolios; (x) changes in the quality or composition of our loan and investment portfolios; (xi) adequacy of loan loss reserves; (xii) increased competition; (xiii) loss of certain key officers; (xiv) deposit attrition; (xv) rapidly changing technology; (xvi) unanticipated regulatory or judicial proceedings and liabilities and other costs; (xvii) changes in the cost of funds, demand for loan products or demand for financial services; and (xviii) other economic, competitive, governmental or technological factors affecting our operations, markets, products, services and prices. Such developments could have an adverse impact on CNB's financial position and results of operations.
The forward-looking statements contained herein are based upon management’s beliefs and assumptions. Any forward-looking statement made herein speaks only as of the date on which it is made. Factors or events that could cause our actual results to differ may emerge from time to time, and it is not possible for us to predict all of them. CNB undertakes no obligation to publicly update or revise any forward-looking statements included in this Annual Report on Form 10-K, whether as a result of new information, future events or otherwise, except to the extent required by law. In light of these risks, uncertainties and assumptions, the forward-looking events discussed might not occur and you should not put undue reliance on any forward-looking statements.
Overview
The Corporation is a financial holding company registered under the BHC Act. It was incorporated under the laws of the Commonwealth of Pennsylvania in 1983 for the purpose of engaging in the business of a financial holding company. The Corporation’s subsidiary, the Bank, provides financial services to individuals and businesses. The CNB Bank franchise's primary market areas are the Pennsylvania counties of Blair, Cambria, Centre, Clearfield, Elk, Indiana, Jefferson, and McKean. ERIEBANK, a division of the Bank, operates in the Pennsylvania counties of Crawford, Erie, and Warren and in the Ohio counties of Ashtabula, Cuyahoga, Geauga, Lake, and Lorain. FCBank, a division of the Bank, operates in the Ohio counties of Crawford, Delaware, Franklin, Knox, Marion, Morrow and Richland. BankOnBuffalo, a division of the Bank, operates in the New York counties of Erie and Niagara. Ridge View Bank, a division of the Bank, operates in the Virginia counties of Botetourt, Craig, Franklin, and Roanoke. Impressia Bank, a division of the Bank, operates in the Bank’s primary market areas. Although the Corporation’s strategies, through its Bank subsidiary, are executed based on the divisions discussed above, the Bank is a single Pennsylvania-chartered bank whereby all divisions of the Bank conduct their business on a doing business as basis.
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In addition to the Bank, the Corporation has four other subsidiaries. CNB Securities Corporation is incorporated in Delaware and currently maintains investments in debt and equity securities. CNB Insurance Agency, incorporated in Pennsylvania, provides for the sale of nonproprietary annuities and other insurance products. CNB Risk Management, Inc., incorporated in Delaware, is a captive insurance company that insures against certain risks unique to the operations of the Corporation and its subsidiaries and for which insurance may not be currently available or economically feasible in today's insurance marketplace. Holiday, incorporated in Pennsylvania, offers small balance unsecured loans and secured loans, primarily collateralized by automobiles and equipment, to borrowers with higher risk characteristics.
Non-GAAP Financial Information
This report contains references to financial measures that are not defined in GAAP. Management uses non-GAAP financial information in its analysis of the Corporation’s performance. Management believes that these non-GAAP measures provide a greater understanding of ongoing operations, enhance comparability of results of operations with prior periods and show the effects of significant gains and charges in the periods presented. The Corporation’s management believes that investors may use these non-GAAP measures to analyze the Corporation’s financial performance without the impact of unusual items or events that may obscure trends in the Corporation’s underlying performance. This non-GAAP data should be considered in addition to results prepared in accordance with GAAP, and is not a substitute for, or superior to, GAAP results. Limitations associated with non-GAAP financial measures include the risks that persons might disagree as to the appropriateness of items included in these measures and that different companies might calculate these measures differently.
Non-GAAP measures reflected within the discussion below include:
•Tangible book value per common share;
•Tangible common equity/tangible assets;
•Net interest margin (fully tax equivalent basis);
•Efficiency ratio;
•Pre-provision net revenue ("PPNR");
•Return on average tangible common equity; and
•Non-interest income excluding realized gains on available-for-sale ("AFS") securities.
A reconciliation of these non-GAAP financial measures is provided below in the "Non-GAAP Financial Measures" section.
Primary Factors Used To Evaluate Performance
Management considers return on average assets, return on average equity, return on average tangible common equity, earnings per common share, tangible book value per common share, asset quality, net interest margin, and other metrics as key measures of the financial performance of the Corporation. The interest rate environment will continue to play an important role in the future earnings of the Corporation. To address the challenging interest rate and competitive environments, the Corporation continues to evaluate, develop and implement strategies necessary to support its ongoing financial performance objectives and future growth goals. Additionally, management frequently evaluates the potential impact of economic and geopolitical events that may have an impact on the credit risk profile of its customers and develops proactive strategies to mitigate such potential impacts on the Corporation’s loan portfolio.
Financial Condition
The following table presents ending balances, growth, and the percentage change of certain measures of our financial condition for specified years (dollars in millions):

| 2023 Balance |  | 2022 Balance |  | $ Change vs. prior year |  | % Change vs. prior year |  |  |  |  |  |  |  |
Total assets | $ | 5,753.0 |  |  | $ | 5,475.2 |  |  | $ | 277.8 |  |  | 5.1 | % |  |  |  |  |  |  |  |
Total loans, net of allowance for credit losses | 4,422.6 |  |  | 4,231.7 |  |  | 190.9 |  |  | 4.5 |  |  |  |  |  |  |  |  |
Total securities | 740.2 |  |  | 785.8 |  |  | (45.6) |  |  | (5.8) |  |  |  |  |  |  |  |  |
Total deposits | 4,998.8 |  |  | 4,622.4 |  |  | 376.3 |  |  | 8.1 |  |  |  |  |  |  |  |  |
Total shareholders’ equity | 571.2 |  |  | 530.8 |  |  | 40.5 |  |  | 7.6 |  |  |  |  |  |  |  |  |

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Cash and Cash Equivalents
Cash and cash equivalents totaled $222.0 million at December 31, 2023, including $164.4 million held at the Federal Reserve. Cash and cash equivalents totaled $106.3 million at December 31, 2022. The increase in cash and cash equivalents from December 31, 2022 to December 31, 2023 was primarily due to an increase in deposits coupled with a decrease in the production of the loan portfolio, offset by a decrease in the paydowns and maturities on the securities portfolio. The increase in deposits was primarily driven by the impact of competitive pricing pressures due to the rapid increase in interest rates.
Management believes the liquidity needs of the Corporation are satisfied primarily by the current balance of cash and cash equivalents, customer deposits, FHLB financing, other funding sources and the portions of the securities and loan portfolios that mature within one year. The Corporation currently expects that these sources of funds will enable it to meet cash obligations and off-balance sheet commitments as they come due. In addition to the above noted liquidity sources, the Corporation maintains access to the Federal Reserve discount window.
Securities
AFS debt securities and equity securities totaled $351.3 million and $381.0 million at December 31, 2023 and 2022, respectively. Investments classified as held-to-maturity ("HTM") securities totaled $389.0 million and $404.8 million at December 31, 2023 and 2022, respectively. During 2022, as a result of the Corporation’s asset/liability and capital management strategies, securities with a combined amortized cost of $220.8 million and a fair value of $213.7 million were transferred from AFS to HTM. These HTM portfolio bonds continue to support liquidity through pledging and can be utilized as collateral against borrowings. In addition to these internal portfolio transfers, some of the investment purchases made by the Corporation during 2022 were also classified as HTM debt securities.
The Corporation’s objective is to maintain the investment securities portfolio at an appropriate level to balance the earnings and liquidity provided by the portfolio. Note 2, "Securities," in the consolidated financial statements provides more detail concerning the composition of the Corporation’s investment securities portfolio and the process for evaluating securities for impairment.
The following table summarizes the maturity distribution schedule with corresponding weighted-average yields of AFS debt securities as of December 31, 2023. Weighted-average yields have been computed on a fully taxable-equivalent basis using a tax rate of 21%. Mortgage-backed securities are included in maturity categories based on their stated maturity date.

| December 31, 2023
| Within One Year |  | After One But Within Five Years |  | After Five But Within Ten Years |  | After Ten Years |  | Total
| $ Amt. |  | Yield |  | $ Amt. |  | Yield |  | $ Amt. |  | Yield |  | $ Amt. |  | Yield |  | $ Amt. |  | Yield
U.S. Government Sponsored Entities | $ | 4,747 |  |  | 3.98 | % |  | $ | 241 |  |  | 1.29 | % |  | $ | — |  |  | — | % |  | $ | — |  |  | — | % |  | $ | 4,988 |  |  | 3.85 | %
State and Political Subdivisions | 3,163 |  |  | 3.08 |  |  | 27,565 |  |  | 2.55 |  |  | 44,803 |  |  | 2.11 |  |  | 16,278 |  |  | 2.29 |  |  | 91,809 |  |  | 2.31 |
Residential and multi-family mortgage | 59 |  |  | 3.00 |  |  | 13,542 |  |  | 3.11 |  |  | 17,701 |  |  | 2.24 |  |  | 160,217 |  |  | 1.58 |  |  | 191,519 |  |  | 1.75 |
Corporate notes and bonds | 4,992 |  |  | 3.17 |  |  | 10,945 |  |  | 5.66 |  |  | 27,202 |  |  | 4.48 |  |  | — |  |  | — |  |  | 43,139 |  |  | 4.63 |
Pooled SBA | 23 |  |  | 4.83 |  |  | 181 |  |  | 5.40 |  |  | 8,770 |  |  | 2.59 |  |  | 1,526 |  |  | 2.11 |  |  | 10,500 |  |  | 2.57 |
Total | $ | 12,984 |  |  | 3.45 | % |  | $ | 52,474 |  |  | 3.35 | % |  | $ | 98,476 |  |  | 2.83 | % |  | $ | 178,021 |  |  | 1.65 | % |  | $ | 341,955 |  |  | 2.32 | %

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The following table summarizes the maturity distribution schedule with corresponding weighted-average yields of HTM debt securities as of December 31, 2023.

| December 31, 2023 |  |  |  |
| Within One Year |  | After One But Within Five Years |  | After Five But Within Ten Years |  | After Ten Years |  | Total |  |  |  |
| $ Amt. |  | Yield |  | $ Amt. |  | Yield |  | $ Amt. |  | Yield |  | $ Amt. |  | Yield |  | $ Amt. |  | Yield |  |  |  |
U.S. Government Sponsored Entities | $ | 68,745 |  |  | 1.61 | % |  | $ | 188,794 |  |  | 1.52 | % |  | $ | 45,406 |  |  | 1.81 | % |  | $ | — |  |  | — | % |  | $ | 302,945 |  |  | 1.58 | % |  |  |  |
Residential and multi-family mortgage | 3,010 |  |  | 2.68 |  |  | 548 |  |  | 2.87 |  |  | 2,249 |  |  | 3.23 |  |  | 80,216 |  |  | 2.58 |  |  | 86,023 |  |  | 2.60 |  |  |  |  |
Total | $ | 71,755 |  |  | 1.65 | % |  | $ | 189,342 |  |  | 1.52 | % |  | $ | 47,655 |  |  | 1.88 | % |  | $ | 80,216 |  |  | 2.58 | % |  | $ | 388,968 |  |  | 1.81 | % |  |  |  |

The following table summarizes the weighted average modified duration of AFS debt securities as of December 31, 2023.

| Weighted Average Modified Duration (in Years)
U.S. Government Sponsored Entities | 0.37 |
State and Political Subdivisions | 5.70 |
Residential and multi-family mortgage | 6.00 |
Corporate notes and bonds | 4.38 |
Pooled SBA | 2.57 |
Total | 5.53 |

The following table summarizes the weighted average modified duration of HTM debt securities as of December 31, 2023.

| Weighted Average Modified Duration (in Years)
U.S. Government Sponsored Entities | 2.54 |
Residential and multi-family mortgage | 6.42 |
Total | 3.40 |

The portfolio contains no holdings of a single issuer that exceeds 10% of shareholders’ equity other than U.S. government sponsored entities.
The Corporation generally purchases debt securities over time and does not attempt to "time" its transactions, which allows for more efficient management of fluctuations in the interest rate environment. The Corporation's strategy given the current environment is to focus on lower risk securities and shorter durations that complement the current portfolio investment ladder, coupled with consistent reinvestment of cash flows to replace lower earning assets.
The Corporation monitors the earnings performance and the effectiveness of the liquidity of the securities portfolio on a regular basis through meetings of the Asset/Liability Committee ("ALCO"). The ALCO also reviews and manages interest rate risk for the Corporation. Through active balance sheet management and analysis of the securities portfolio, a sufficient level of liquidity is maintained to satisfy depositor requirements and various credit needs of our customers.
Loans Receivable
Note 3, "Loans Receivable and Allowance for Credit Losses," to the consolidated financial statements provides more detail concerning the loan portfolio of the Corporation.
At December 31, 2023, loans totaled $4.4 billion, excluding the balances of (i) syndicated loans, and (ii) any remaining balances on Paycheck Protection Program ("PPP") loans, net of PPP-related fees (such loans being referred to as the "PPP-related loans"). This adjusted total of $4.4 billion in loans represented an increase of $241.3 million, or 5.86%, compared to the same adjusted total loans measured as of December 31, 2022. Loan growth for the year ended December 31, 2023 primarily resulted from growth in the Corporation's recent expansion markets of Cleveland, Ohio, Roanoke, Virginia, and Buffalo, New York combined with growth in the portfolios related to the Columbus, Ohio market and CNB Bank’s Private Banking division.
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At December 31, 2023, the Corporation's balance sheet reflected a decrease in syndicated lending balances of $49.9 million compared to December 31, 2022, reflecting scheduled paydowns or early payoffs of certain syndicated credits during 2023. The syndicated loan portfolio totaled $108.7 million, or 2.43% of total loans, excluding PPP-related loans, at December 31, 2023, compared to $156.6 million, or 3.66% of total loans, excluding PPP-related loans at December 31, 2022.
Loan Origination/Risk Management
The Corporation has certain lending policies and procedures in place that are designed to maximize loan income within an acceptable level of risk. Management reviews and approves these policies and procedures on a regular basis. A reporting system supplements the review process by providing management with frequent reports related to loan production, loan quality, concentrations of credit, loan delinquencies and nonperforming and potential problem loans. Diversification in the loan portfolio is a means of managing risk associated with fluctuations in economic conditions. The Corporation has not underwritten any hybrid loans, payment option loans, or low documentation/no documentation loans. Variable rate loans are generally underwritten at the fully indexed rate. Loan underwriting policies and procedures have not changed materially between any periods presented. As discussed more fully above, syndicated loan purchases are underwritten utilizing the same process as the Corporation’s originated loans.
The Corporation continues to explore the credit and reputational risks associated with climate change and their potential impact on the foregoing, while closely monitoring regulatory developments on climate risk. This includes, among other things, researching and developing a formalized approach to considering climate change related risks in the Corporation's underwriting processes. This approach will be impacted, in part, by the accessibility and reliability of both customer climate risk data and climate risk data in general. One of the objectives of these efforts is to enable the Corporation to better understand the climate change related risks associated with the Corporation's customers' business activities and to be able to monitor their response to those risks and their ultimate impact on the Corporation's customers.
Loan Portfolio Profile
As part of our lending policy and risk management activities, the Corporation tracks lending exposure by industry classification and type to determine potential risks associated with industry concentrations, and if any risk issues could lead to additional credit loss exposure. In the current post-pandemic and inflationary economic environment, the Corporation has determined that office commercial real estate ("commercial office") inherently could pose a higher level of credit risk, even given the historical high credit quality ratings and structures applied to the Corporation's outstanding commercial office credit extensions when initially underwritten and when funding or commitments were made. The Corporation monitors numerous relevant sensitivity elements at both underwriting and through and beyond the funding period, including projects occupancy, loan-to-value, absorption and cap rates, debt service coverage and covenant compliance, and developer/lessor financial strength both in the project and globally. At December 31, 2023, the Corporation had the following key metrics related to its commercial office portfolio:
•Commercial office loans outstanding consisted of 118 loans, totaling $114.7 million, or 2.57% of total loans outstanding;
•Nonaccrual commercial office loans (one customer relationship) totaled $508 thousand, or 0.44% of total office loans outstanding. One customer relationship had a related specific loss reserve of $289 thousand, at December 31, 2023; and
•The average outstanding balance per commercial office loan was $972 thousand.
The Corporation had no commercial office loan relationships considered by the banking regulators to be a high volatility commercial real estate credit.
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Maturities and Sensitivities of Loans Receivable to Changes in Interest Rate
The following table presents the maturity distribution of the Corporation's loans receivable at December 31, 2023. The table also presents the portion of loans receivable that have fixed interest rates or variable interest rates that fluctuate over the life of the loans in accordance with changes in an interest rate index.

| December 31, 2023 |  |  |  |
| Due in One Year or Less |  | After One, but Within Five Years |  | After Five but Within Fifteen Years |  | After Fifteen Years |  | Total |  |  |  |
Loans Receivable with Fixed Interest Rate |  |  |  |  |  |  |  |  |  |  |  |  |
Farmland | $ | — |  |  | $ | 1,776 |  |  | $ | 7,787 |  |  | $ | — |  |  | $ | 9,563 |  |  |  |  |
Owner-occupied, nonfarm nonresidential properties | 16,525 |  |  | 31,513 |  |  | 19,875 |  |  | 4,665 |  |  | 72,578 |  |  |  |  |
Agricultural production and other loans to farmers | 9 |  |  | 135 |  |  | — |  |  | — |  |  | 144 |  |  |  |  |
Commercial and Industrial | 19,955 |  |  | 257,755 |  |  | 27,165 |  |  | — |  |  | 304,875 |  |  |  |  |
Obligations (other than securities and leases) of states and political subdivisions | 3,033 |  |  | 18,298 |  |  | 83,960 |  |  | 8,417 |  |  | 113,708 |  |  |  |  |
Other loans | 19 |  |  | 581 |  |  | 544 |  |  | 12,384 |  |  | 13,528 |  |  |  |  |
Other construction loans and all land development and other land loans (1) | 41,948 |  |  | 44,049 |  |  | 10,976 |  |  | 1,376 |  |  | 98,349 |  |  |  |  |
Multifamily (5 or more) residential properties | 2,143 |  |  | 36,796 |  |  | 2,868 |  |  | 4,400 |  |  | 46,207 |  |  |  |  |
Non-owner occupied, nonfarm nonresidential properties | 23,938 |  |  | 96,791 |  |  | 56,139 |  |  | 802 |  |  | 177,670 |  |  |  |  |
1-4 Family Construction (1) | 238 |  |  | — |  |  | 392 |  |  | 1,335 |  |  | 1,965 |  |  |  |  |
Home equity lines of credit | 3 |  |  | 57 |  |  | 549 |  |  | 263 |  |  | 872 |  |  |  |  |
Residential Mortgages secured by first liens | 4,257 |  |  | 34,061 |  |  | 223,322 |  |  | 130,139 |  |  | 391,779 |  |  |  |  |
Residential Mortgages secured by junior liens | 589 |  |  | 7,966 |  |  | 60,734 |  |  | 13,824 |  |  | 83,113 |  |  |  |  |
Other revolving credit plans | 6 |  |  | 7 |  |  | 19 |  |  | — |  |  | 32 |  |  |  |  |
Automobile | 447 |  |  | 17,726 |  |  | 7,142 |  |  | — |  |  | 25,315 |  |  |  |  |
Other consumer | 4,507 |  |  | 34,771 |  |  | 7,401 |  |  | 4,737 |  |  | 51,416 |  |  |  |  |
Credit cards | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  |  |  |
Overdrafts | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  |  |  |
Total | $ | 117,617 |  |  | $ | 582,282 |  |  | $ | 508,873 |  |  | $ | 182,342 |  |  | $ | 1,391,114 |  |  |  |  |
Loans Receivable with Variable or Floating Interest Rate |  |  |  |  |  |  |  |  |  |  |  |  |
Farmland | $ | 303 |  |  | $ | 3,962 |  |  | $ | 9,622 |  |  | $ | 8,419 |  |  | $ | 22,306 |  |  |  |  |
Owner-occupied, nonfarm nonresidential properties | 17,382 |  |  | 59,275 |  |  | 283,594 |  |  | 60,235 |  |  | 420,486 |  |  |  |  |
Agricultural production and other loans to farmers | 674 |  |  | 157 |  |  | 677 |  |  | — |  |  | 1,508 |  |  |  |  |
Commercial and Industrial | 260,487 |  |  | 95,025 |  |  | 64,691 |  |  | 1,364 |  |  | 421,567 |  |  |  |  |
Obligations (other than securities and leases) of states and political subdivisions | — |  |  | 3,319 |  |  | 10,877 |  |  | 24,297 |  |  | 38,493 |  |  |  |  |
Other loans | 430 |  |  | 3,007 |  |  | 8,542 |  |  | — |  |  | 11,979 |  |  |  |  |
Other construction loans and all land development and other land loans (1) | 81,654 |  |  | 160,574 |  |  | 140,659 |  |  | 10,303 |  |  | 393,190 |  |  |  |  |
Multifamily (5 or more) residential properties | 30,687 |  |  | 17,336 |  |  | 155,247 |  |  | 4,865 |  |  | 208,135 |  |  |  |  |
Non-owner occupied, nonfarm nonresidential properties | 44,188 |  |  | 254,453 |  |  | 357,789 |  |  | 61,943 |  |  | 718,373 |  |  |  |  |
1-4 Family Construction (1) | 15,614 |  |  | 2,432 |  |  | 7,289 |  |  | 23,907 |  |  | 49,242 |  |  |  |  |
Home equity lines of credit | 7,858 |  |  | 6,034 |  |  | 48,488 |  |  | 67,448 |  |  | 129,828 |  |  |  |  |
Residential Mortgages secured by first liens | 9,194 |  |  | 30,679 |  |  | 145,561 |  |  | 413,773 |  |  | 599,207 |  |  |  |  |
Residential Mortgages secured by junior liens | 1,944 |  |  | 558 |  |  | 4,633 |  |  | 815 |  |  | 7,950 |  |  |  |  |
Other revolving credit plans | 5,522 |  |  | 2,405 |  |  | 33,576 |  |  | 1,342 |  |  | 42,845 |  |  |  |  |
Automobile | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  |  |  |
Other consumer | — |  |  | 36 |  |  | 79 |  |  | 61 |  |  | 176 |  |  |  |  |
Credit cards | 11,785 |  |  | — |  |  | — |  |  | — |  |  | 11,785 |  |  |  |  |
Overdrafts | 292 |  |  | — |  |  | — |  |  | — |  |  | 292 |  |  |  |  |
Total | $ | 488,014 |  |  | $ | 639,252 |  |  | $ | 1,271,324 |  |  | $ | 678,772 |  |  | $ | 3,077,362 |  |  |  |  |
1 1-4 family construction loans and other construction loans and all land development and other land loans segments may include loans that have a permanent financing period as part of the original term of the loan. Upon completion of the construction period the loans are reclassified to their permanent financing loan segment. |  |  |  |

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Loan Concentration
At December 31, 2023, no industry concentration existed which exceeded 10% of the total loan portfolio.
Loan Quality
The following table presents information concerning the loan portfolio delinquency and other nonperforming assets at December 31, 2023 and 2022:

| December 31, 2023 |  | December 31, 2022 |  |  |  |  |  |
Nonaccrual loans | $ | 29,639 |  |  | $ | 20,986 |  |  |  |  |  |  |
Accrual loans greater than 90 days past due | 55 |  |  | 1,121 |  |  |  |  |  |  |
Total nonperforming loans | 29,694 |  |  | 22,107 |  |  |  |  |  |  |
Other real estate owned | 2,111 |  |  | 1,439 |  |  |  |  |  |  |
Total nonperforming assets | $ | 31,805 |  |  | $ | 23,546 |  |  |  |  |  |  |
Total loans | $ | 4,468,476 |  |  | $ | 4,275,178 |  |  |  |  |  |  |
Nonaccrual loans as a percentage of loans | 0.66 | % |  | 0.49 | % |  |  |  |  |  |
Total assets | $ | 5,752,957 |  |  | $ | 5,475,179 |  |  |  |  |  |  |
Nonperforming assets as a percentage of total assets | 0.55 | % |  | 0.43 | % |  |  |  |  |  |
Allowance for credit losses on loans | $ | 45,832 |  |  | $ | 43,436 |  |  |  |  |  |  |
Allowance for credit losses / Total loans | 1.03 | % |  | 1.02 | % |  |  |  |  |  |
Ratio of allowance for credit losses on loans to nonaccrual loans | 154.63 | % |  | 206.98 | % |  |  |  |  |  |

Total nonperforming assets were approximately $31.8 million, or 0.55% of total assets, as of December 31, 2023, compared to $23.5 million, or 0.43% of total assets, as of December 31, 2022. The increase in nonperforming assets for the year ended December 31, 2023 was primarily due to one commercial and industrial relationship consisting of 12 loans totaling $3.2 million being placed on nonaccrual status during the fourth quarter of 2023, coupled with one commercial real estate relationship consisting of two loans totaling $6.6 million being placed on nonaccrual status during the third quarter of 2023, as previously disclosed by the Corporation. The commercial relationship with two loans placed on nonaccrual status in the third quarter has a related combined specific loss reserve of $472 thousand at December 31, 2023. While this loan relationship was placed on non-accrual status during the third quarter of 2023, based on collateral value support coupled with the specific reserve recorded against this loan relationship, management currently does not believe there is risk of significant additional loss exposure beyond the specific reserve related to this loan relationship.
The Corporation has established written lending policies and procedures that require underwriting standards, loan documentation, and credit analysis standards to be met prior to funding a loan. Subsequent to the funding of a loan, ongoing review of credits is required. Credit reviews are performed quarterly by an outsourced loan review firm and cover approximately 65% of the commercial loan portfolio on an annual basis. In addition, the external independent loan review firm reviews past due loans and all significant classified assets and nonaccrual loans annually.
Potential problem loans consist of loans that are performing in accordance with contractual terms but for which management has concerns about the ability of a borrower to continue to comply with contractual repayment terms because of the borrower’s potential operating or financial difficulties. Management monitors these "watchlist" loans monthly to determine potential losses within the commercial loan portfolio. The "watchlist" is comprised of all credits risk rated special mention, substandard and doubtful.
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Allowance for Credit Losses
The amount of each allowance for credit losses account represents management's best estimate of current expected credit losses on these financial instruments considering available information, from internal and external sources, relevant to assessing exposure to credit loss over the contractual term of the instrument. Relevant available information includes historical credit loss experience, current conditions and reasonable and supportable forecasts. While historical credit loss experience provides the basis for the estimation of expected credit losses, adjustments to historical loss information may be made for differences in current portfolio-specific risk characteristics, environmental conditions or other relevant internal and external factors. While management utilizes its best judgment and information available, the ultimate adequacy of the Corporation's allowance for credit losses account is dependent upon a variety of factors beyond the Corporation's control, including the performance of the Corporation's loan portfolios, the economy, changes in interest rates and the view of the regulatory authorities toward classification of assets. The adequacy of the allowance for credit losses is subject to a formal analysis by the Credit Administration and Finance Departments of the Corporation. For additional information regarding the Corporation's accounting policies related to credit losses, refer to Note 1, "Summary of Significant Accounting Policies" and Note 3, "Loans and Allowance for Credit Losses" to these consolidated financial statements.
The table below provides an allocation of the allowance for credit losses on loans by loan portfolio segment at December 31, 2023 and 2022; however, allocation of a portion of the allowance to one segment does not preclude its availability to absorb losses in other segments.

| December 31, 2023
| Amount of Allowance Allocated |  | Percent of Loans in Each Category to Total Loans |  | Total Loans |  | Ratio of Allowance Allocated to Loans in Each Category
Farmland | $ | 126 |  |  | 0.7 | % |  | $ | 31,869 |  |  | 0.40 | %
Owner-occupied, nonfarm nonresidential properties | 3,949 |  |  | 11.0 |  |  | 493,064 |  |  | 0.80 |
Agricultural production and other loans to farmers | 7 |  |  | — |  |  | 1,652 |  |  | 0.42 |
Commercial and Industrial | 9,433 |  |  | 16.3 |  |  | 726,442 |  |  | 1.30 |
Obligations (other than securities and leases) of states and political subdivisions | 2,613 |  |  | 3.4 |  |  | 152,201 |  |  | 1.72 |
Other loans | 387 |  |  | 0.6 |  |  | 25,507 |  |  | 1.52 |
Other construction loans and all land development and other land loans | 4,033 |  |  | 11.0 |  |  | 491,539 |  |  | 0.82 |
Multifamily (5 or more) residential properties | 1,030 |  |  | 5.7 |  |  | 254,342 |  |  | 0.40 |
Non-owner occupied, nonfarm nonresidential properties | 9,170 |  |  | 20.1 |  |  | 896,043 |  |  | 1.02 |
1-4 Family Construction | 356 |  |  | 1.1 |  |  | 51,207 |  |  | 0.70 |
Home equity lines of credit | 831 |  |  | 2.9 |  |  | 130,700 |  |  | 0.64 |
Residential Mortgages secured by first liens | 8,050 |  |  | 22.2 |  |  | 990,986 |  |  | 0.81 |
Residential Mortgages secured by junior liens | 1,476 |  |  | 2.0 |  |  | 91,063 |  |  | 1.62 |
Other revolving credit plans | 973 |  |  | 1.0 |  |  | 42,877 |  |  | 2.27 |
Automobile | 358 |  |  | 0.6 |  |  | 25,315 |  |  | 1.41 |
Other consumer | 2,653 |  |  | 1.1 |  |  | 51,592 |  |  | 5.14 |
Credit cards | 95 |  |  | 0.3 |  |  | 11,785 |  |  | 0.81 |
Overdrafts | 292 |  |  | — |  |  | 292 |  |  | 100.00 |
Total loans | $ | 45,832 |  |  | 100.0 | % |  | $ | 4,468,476 |  |  | 1.03 | %

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| December 31, 2022
| Amount of Allowance Allocated |  | Percent of Loans in Each Category to Total Loans |  | Total Loans |  | Ratio of Allowance Allocated to Loans in Each Category
Farmland | $ | 159 |  |  | 0.8 | % |  | $ | 32,168 |  |  | 0.49 | %
Owner-occupied, nonfarm nonresidential properties | 2,905 |  |  | 11.0 |  |  | 468,493 |  |  | 0.62 |
Agricultural production and other loans to farmers | 6 |  |  | — |  |  | 1,198 |  |  | 0.50 |
Commercial and Industrial | 9,766 |  |  | 18.5 |  |  | 791,911 |  |  | 1.23 |
Obligations (other than securities and leases) of states and political subdivisions | 1,863 |  |  | 3.4 |  |  | 145,345 |  |  | 1.28 |
Other loans | 456 |  |  | 0.6 |  |  | 24,710 |  |  | 1.85 |
Other construction loans and all land development and other land loans | 3,253 |  |  | 10.5 |  |  | 446,685 |  |  | 0.73 |
Multifamily (5 or more) residential properties | 2,353 |  |  | 6.0 |  |  | 257,696 |  |  | 0.91 |
Non-owner occupied, nonfarm nonresidential properties | 7,653 |  |  | 18.6 |  |  | 795,315 |  |  | 0.96 |
1-4 Family Construction | 327 |  |  | 1.2 |  |  | 51,171 |  |  | 0.64 |
Home equity lines of credit | 1,173 |  |  | 2.9 |  |  | 124,892 |  |  | 0.94 |
Residential Mortgages secured by first liens | 8,484 |  |  | 22.0 |  |  | 942,531 |  |  | 0.90 |
Residential Mortgages secured by junior liens | 1,035 |  |  | 1.7 |  |  | 74,638 |  |  | 1.39 |
Other revolving credit plans | 722 |  |  | 0.9 |  |  | 36,372 |  |  | 1.99 |
Automobile | 271 |  |  | 0.5 |  |  | 21,806 |  |  | 1.24 |
Other consumer | 2,665 |  |  | 1.1 |  |  | 49,144 |  |  | 5.42 |
Credit cards | 67 |  |  | 0.3 |  |  | 10,825 |  |  | 0.62 |
Overdrafts | 278 |  |  | — |  |  | 278 |  |  | 100.00 |
Total loans | $ | 43,436 |  |  | 100.0 | % |  | $ | 4,275,178 |  |  | 1.02 | %

The allowance for credit losses measured as a percentage of total loans was 1.03% as of December 31, 2023, compared to 1.02% as of December 31, 2022.
The Corporation's allowance for credit losses is influenced by loan volumes, risk rating migration, delinquency status and other internal and external conditions influencing loss expectations, such as reasonable and supportable forecasts of economic conditions and other external factors.
For the year ended December 31, 2023, the allowance for credit losses increased primarily due to the growth in the Corporation's loan portfolio, including growth in new market areas. This was partially offset by improvements in the Corporation's historical loss rates, as well as the impact of net charge-offs. The year-over-year increase in reserves experienced in 2022 was primarily due to loan growth, the impact of net charge-offs, and the provision for credit losses recorded in 2022. There is still a significant amount of uncertainty related to the domestic and global economy, tightening credit conditions, persistent inflation, and higher interest rates. Management will continue to proactively evaluate its estimate of expected credit losses as new information becomes available.
Note 3, "Loans Receivable and Allowance for Credit Losses," to the consolidated financial statements provides further disclosure of loan balances by portfolio segment as of December 31, 2023 and 2022, as well as the nature and scope of loan modifications to borrowers experiencing financial difficulty and loans modified in a troubled debt restructuring during 2023 and 2022, respectively, and the related effect on provision for credit expense and allowance for credit losses.
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Additional information related to credit loss expense and net (charge-offs) recoveries at December 31, 2023, 2022, and 2021 is presented in the tables below.

| Year Ended December 31, 2023
| Provision (Benefit) for Credit Losses on Loans Receivable (1) |  | Net (Charge-Offs) Recoveries |  | Average Loans Receivable |  | Ratio of Annualized Net (Charge-Offs) Recoveries to Average Loans Receivable
Farmland | $ | (33) |  |  | $ | — |  |  | $ | 34,397 |  |  | — | %
Owner-occupied, nonfarm nonresidential properties | 1,041 |  |  | 3 |  |  | 502,925 |  |  | — |
Agricultural production and other loans to farmers | 1 |  |  | — |  |  | 1,255 |  |  | — |
Commercial and Industrial | (379) |  |  | 46 |  |  | 777,991 |  |  | 0.01 |
Obligations (other than securities and leases) of states and political subdivisions | 750 |  |  | — |  |  | 154,225 |  |  | — |
Other loans | (69) |  |  | — |  |  | 30,410 |  |  | — |
Other construction loans and all land development and other land loans | 780 |  |  | — |  |  | 435,967 |  |  | — |
Multifamily (5 or more) residential properties | (1,264) |  |  | (59) |  |  | 259,557 |  |  | (0.02) |
Non-owner occupied, nonfarm nonresidential properties | 2,201 |  |  | (684) |  |  | 838,674 |  |  | (0.08) |
1-4 Family Construction | 29 |  |  | — |  |  | 55,392 |  |  | — |
Home equity lines of credit | (337) |  |  | (5) |  |  | 124,865 |  |  | — |
Residential Mortgages secured by first liens | (320) |  |  | (114) |  |  | 966,225 |  |  | (0.01) |
Residential Mortgages secured by junior liens | 441 |  |  | — |  |  | 84,803 |  |  | — |
Other revolving credit plans | 340 |  |  | (89) |  |  | 41,417 |  |  | (0.21) |
Automobile | 142 |  |  | (55) |  |  | 25,044 |  |  | (0.22) |
Other consumer | 1,836 |  |  | (1,848) |  |  | 49,631 |  |  | (3.72) |
Credit cards | 199 |  |  | (171) |  |  | 13,261 |  |  | (1.29) |
Overdrafts | 479 |  |  | (465) |  |  | 302 |  |  | (153.97) |
Total | $ | 5,837 |  |  | $ | (3,441) |  |  | $ | 4,396,341 |  |  | (0.08) | %

(1) Excludes provision for credit losses totaling $759 thousand related to unfunded commitments. Note 18, "Off-Balance Sheet Commitments and Contingencies," in the consolidated financial statements provides more detail concerning the provision for credit losses related to unfunded commitments of the Corporation.
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| Year Ended December 31, 2022
| Provision (Benefit) for Credit Losses on Loans Receivable (1) |  | Net (Charge-Offs) Recoveries |  | Average Loans Receivable |  | Ratio of Annualized Net (Charge-Offs) Recoveries to Average Loans Receivable
Farmland | $ | 8 |  |  | $ | — |  |  | $ | 32,075 |  |  | — | %
Owner-occupied, nonfarm nonresidential properties | (428) |  |  | (6) |  |  | 467,606 |  |  | — |
Agricultural production and other loans to farmers | (3) |  |  | — |  |  | 1,254 |  |  | — |
Commercial and Industrial | 965 |  |  | (36) |  |  | 762,585 |  |  | — |
Obligations (other than securities and leases) of states and political subdivisions | 214 |  |  | — |  |  | 149,253 |  |  | — |
Other loans | 307 |  |  | — |  |  | 16,861 |  |  | — |
Other construction loans and all land development and other land loans | 1,055 |  |  | — |  |  | 334,450 |  |  | — |
Multifamily (5 or more) residential properties | 64 |  |  | — |  |  | 227,715 |  |  | — |
Non-owner occupied, nonfarm nonresidential properties | 1,171 |  |  | 1 |  |  | 697,930 |  |  | — |
1-4 Family Construction | 169 |  |  | — |  |  | 41,849 |  |  | — |
Home equity lines of credit | (8) |  |  | 12 |  |  | 115,682 |  |  | 0.01 |
Residential Mortgages secured by first liens | 1,564 |  |  | (23) |  |  | 874,675 |  |  | — |
Residential Mortgages secured by junior liens | 489 |  |  | — |  |  | 63,362 |  |  | — |
Other revolving credit plans | 236 |  |  | (42) |  |  | 29,398 |  |  | (0.14) |
Automobile | 34 |  |  | (26) |  |  | 20,677 |  |  | (0.13) |
Other consumer | 1,653 |  |  | (1,534) |  |  | 50,196 |  |  | (3.06) |
Credit cards | 36 |  |  | (61) |  |  | 11,872 |  |  | (0.51) |
Overdrafts | 460 |  |  | (423) |  |  | 282 |  |  | (150.00) |
Total | $ | 7,986 |  |  | $ | (2,138) |  |  | $ | 3,897,722 |  |  | (0.05) | %

(1) Excludes provision for credit losses totaling $603 thousand related to unfunded commitments. Note 18, "Off-Balance Sheet Commitments and Contingencies," in the consolidated financial statements provides more detail concerning the provision for credit losses related to unfunded commitments of the Corporation.

|  |  |  |  |  |  | Year Ended December 31, 2021 |  |
|  |  |  |  |  |  | Provision (Benefit) for Credit Loss Expense |  | Net (Charge-Offs) Recoveries |  | Average Loans |  | Ratio of Annualized Net (Charge-Offs) Recoveries to Average Loans |  |
Farmland |  |  |  |  |  |  | $ | (70) |  |  | $ | — |  |  | $ | 22,970 |  |  | — | % |  |
Owner-occupied, nonfarm nonresidential properties |  |  |  |  |  |  | 213 |  |  | (574) |  |  | 428,377 |  |  | (0.13) |  |  |
Agricultural production and other loans to farmers |  |  |  |  |  |  | (15) |  |  | — |  |  | 2,245 |  |  | — |  |  |
Commercial and Industrial |  |  |  |  |  |  | 2,564 |  |  | 40 |  |  | 680,368 |  |  | 0.01 |  |  |
Obligations (other than securities and leases) of states and political subdivisions |  |  |  |  |  |  | 1,028 |  |  | (377) |  |  | 138,604 |  |  | (0.27) |  |  |
Other loans |  |  |  |  |  |  | 81 |  |  | — |  |  | 12,187 |  |  | — |  |  |
Other construction loans and all land development and other land loans |  |  |  |  |  |  | 524 |  |  | (282) |  |  | 246,583 |  |  | (0.11) |  |  |
Multifamily (5 or more) residential properties |  |  |  |  |  |  | (435) |  |  | — |  |  | 218,285 |  |  | — |  |  |
Non-owner occupied, nonfarm nonresidential properties |  |  |  |  |  |  | (2,128) |  |  | (49) |  |  | 627,595 |  |  | (0.01) |  |  |
1-4 Family Construction |  |  |  |  |  |  | 76 |  |  | — |  |  | 30,513 |  |  | — |  |  |
Home equity lines of credit |  |  |  |  |  |  | 186 |  |  | (2) |  |  | 106,214 |  |  | — |  |  |
Residential Mortgages secured by first liens |  |  |  |  |  |  | 2,436 |  |  | (32) |  |  | 795,747 |  |  | — |  |  |
Residential Mortgages secured by junior liens |  |  |  |  |  |  | 308 |  |  | (3) |  |  | 55,063 |  |  | (0.01) |  |  |
Other revolving credit plans |  |  |  |  |  |  | 49 |  |  | (28) |  |  | 25,751 |  |  | (0.11) |  |  |
Automobile |  |  |  |  |  |  | 154 |  |  | (23) |  |  | 23,027 |  |  | (0.10) |  |  |
Other consumer |  |  |  |  |  |  | 637 |  |  | (1,053) |  |  | 42,634 |  |  | (2.47) |  |  |
Credit cards |  |  |  |  |  |  | 120 |  |  | (94) |  |  | 9,532 |  |  | (0.99) |  |  |
Overdrafts |  |  |  |  |  |  | 275 |  |  | (278) |  |  | 224 |  |  | (124.11) |  |  |
Total loans |  |  |  |  |  |  | $ | 6,003 |  |  | $ | (2,755) |  |  | $ | 3,465,919 |  |  | (0.08) | % |  |

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During the year ended December 31, 2023, the Corporation recorded a provision for credit losses of $6.0 million compared to $8.6 million for the year ended December 31, 2022. Included in the provision for credit losses for the year ended December 31, 2023, was a $156 thousand expense related to the allowance for unfunded commitments compared to a $603 thousand expense for the year ended December 31, 2022. The $2.6 million reduction in the provision expense for the year ended December 31, 2023 compared to the year ended December 31, 2022 was primarily a result of the decrease in loan portfolio growth. Net charge-offs during the year ended December 31, 2023 were $3.4 million, or 0.08% of average total loans and loans held for sale, compared to $2.1 million, or 0.05% of average total loans and loans held for sale, during the year ended December 31, 2022.
Premises and Equipment
During the years ended December 31, 2023 and 2022, the Corporation invested $10.8 million and $12.3 million, respectively, in its physical infrastructure through the purchase of land, buildings, and equipment.
Bank Owned Life Insurance
The Corporation has periodically purchased Bank Owned Life Insurance ("BOLI"). The policies cover executive officers and a select group of other employees with the Bank being named as beneficiary. Earnings from BOLI assist the Corporation in offsetting its benefit costs. The Corporation made no purchases of BOLI during the year ended December 31, 2023, while the Corporation made $11.6 million purchases of BOLI during the year ended December 31, 2022.
Funding Sources
Deposits
The Corporation’s sources of funds are deposits, borrowings, amortization and repayment of loan principal, interest earned on or maturation of investment securities and funds provided from operations. The Corporation considers deposits to be its primary source of funding in support of growth in assets.

| December 31, 2023 |  | December 31, 2022 |  | Percentage change 2023 vs. 2022
Noninterest-bearing demand deposits | $ | 728,881 |  |  | $ | 898,437 |  |  | (18.9)%
Interest-bearing demand deposits | 803,093 |  |  | 1,007,202 |  |  | (20.3)
Savings | 2,960,282 |  |  | 2,270,337 |  |  | 30.4
Certificates of deposit | 506,494 |  |  | 446,461 |  |  | 13.4
Total | $ | 4,998,750 |  |  | $ | 4,622,437 |  |  | 8.1%

At December 31, 2023, total deposits were $5.0 billion, reflecting an increase of $376.3 million, or 8.1%, from December 31, 2022. The increase in deposits was due to continued growth in the Corporation's treasury management customer base and resulting increases in municipal and institutional/corporate deposits, including new wealth and asset management deposit relationships resulting from CNB's participation in deposit insurance sharing programs.
The following table sets forth the average balances of and the average rates paid on deposits for the period indicated.

| Year Ended December 31,
| 2023 |  | 2022 |  | 2021 |  |
| Average Amount |  | Annual Rate |  | Average Amount |  | Annual Rate |  | Average Amount |  | Annual Rate |  |  |  |
Noninterest-bearing demand deposits | $ | 793,713 |  |  | — | % |  | $ | 847,793 |  |  | — | % |  | $ | 724,839 |  |  | — | % |  |  |  |
Interest-bearing demand deposits | 853,632 |  |  | 0.54 |  |  | 1,061,452 |  |  | 0.20 |  |  | 978,279 |  |  | 0.18 |  |  |  |  |
Savings | 2,666,905 |  |  | 2.92 |  |  | 2,383,918 |  |  | 0.54 |  |  | 2,309,560 |  |  | 0.22 |  |  |  |  |
Certificates of deposit | 517,017 |  |  | 2.97 |  |  | 351,272 |  |  | 1.40 |  |  | 445,488 |  |  | 1.82 |  |  |  |  |
Total | $ | 4,831,267 |  |  |  |  | $ | 4,644,435 |  |  |  |  | $ | 4,458,166 |  |  |  |  |  |  |

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At December 31, 2023, the average deposit balance per account for CNB Bank was approximately $33 thousand.
The following table presents additional information about our December 31, 2023 and 2022 deposits:

| December 31, 2023 |  | December 31, 2022
Time deposits not covered by deposit insurance | $ | 44,665 |  |  | $ | 69,874 |
Total deposits not covered by deposit insurance | 1,438,944 |  |  | 1,864,886 |

At December 31, 2023, the total estimated uninsured deposits for CNB Bank were approximately $1.4 billion, or approximately 28.2% of total CNB Bank deposits. However, when excluding affiliate company deposits of $101.3 million and pledged-investment collateralized deposits of $400.5 million, the adjusted amount and percentage of total estimated uninsured deposits was approximately $937.1 million, or approximately 18.37% of total CNB Bank deposits as of December 31, 2023.
At December 31, 2022, the total estimated uninsured deposits for CNB Bank were approximately $1.9 billion, or approximately 39.1% of total CNB Bank deposits. However, when excluding affiliate company deposits of $143.1 million and pledged-investment collateralized deposits of $396.2 million, the adjusted amount and percentage of total estimated uninsured deposits was approximately $1.3 billion, or approximately 27.8% of total CNB Bank deposits as of December 31, 2022.
Scheduled maturities of time deposits not covered by deposit insurance at December 31, 2023 were as follows:

| December 31, 2023
3 months or less | $ | 6,903 |
Over 3 through 6 months | 18,501 |
Over 6 through 12 months | 17,061 |
Over 12 months | 2,200 |
Total | $ | 44,665 |

Borrowings
Periodically, the Corporation utilizes term borrowings from the FHLB and other lenders to meet funding obligations or match fund certain loan assets. The terms of these borrowings are detailed in Note 10, "Borrowings," to the consolidated financial statements. There were zero in short-term FHLB borrowings as of December 31, 2023, compared to $132.4 million at December 31, 2022.
On October 18, 2021, the Corporation announced that it had completed the redemption of $50 million aggregate principal amount of its 5.75% Fixed-to-Floating Rate Subordinated Notes due October 15, 2026 (the "2026 Notes"), representing all outstanding 2026 Notes. The 2026 Notes were redeemed pursuant to their terms at a price equal to 100% of the principal amount, plus accrued and unpaid interest up to, but excluding, October 15, 2021. The Corporation financed the redemption of the 2026 Notes with cash on hand, including net proceeds from the issuance and sale of $85.0 million aggregate principal amount of the Corporation’s 3.25% Fixed-to-Floating Rate Subordinated Notes due 2031 completed in June 2021. Additional details about our subordinated debentures and notes are included in Note 10, "Borrowings" in the accompanying notes to consolidated financial statements.
Liquidity and Capital Resources
Liquidity
Liquidity measures an organization’s ability to meet its cash obligations as they come due. The liquidity of a financial institution reflects its ability to meet loan requests, to accommodate possible outflows in deposits and to take advantage of interest rate market opportunities. The ability of a financial institution to meet its current financial obligations is a function of its balance sheet structure, its ability to liquidate assets and its access to alternative sources of funds.
The Corporation’s expected material cash requirements for the year ended December 31, 2024 and thereafter consist of withdrawals by depositors, credit commitments to borrowers, shareholder dividends, share repurchases, operating expenses and capital expenditures that are pursuant to the Corporation's strategic initiatives. The Corporation expects to satisfy these short-term and long-term cash requirements through deposit growth, principal and interest payments from loans and investment securities, maturing loans and investment securities, as well as by maintaining access to wholesale funding sources.
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The objective of the Corporation's liquidity management is to manage cash flow and liquidity reserves so that they are adequate to fund the Corporation's operations and to meet cash obligations and other commitments on a timely basis and at a reasonable cost. The Corporation seeks to achieve this objective and ensure that funding needs are met by maintaining an appropriate level of liquid funds through asset/liability management, which includes managing the mix and time to maturity of financial assets and financial liabilities on its balance sheet. The Corporation's liquidity position is enhanced by its ability to raise additional funds as needed in the wholesale markets.
Asset liquidity is provided by liquid assets which are readily marketable or pledgeable or which will mature in the near future. Liquid assets include cash, interest-bearing deposits in banks, including the Federal Reserve, and AFS debt securities. Liability liquidity is provided by access to funding sources which include core deposits, correspondent banks and other wholesale funding sources.
The Corporation's liquidity position is continuously monitored and adjustments are made to the balance between sources and uses of funds as deemed appropriate. Liquidity risk management is an important element in the Corporation's asset/liability management process. The Corporation regularly models liquidity stress scenarios to assess potential liquidity outflows or potential funding shortfalls resulting from economic disruptions, volatility in the financial markets, unexpected credit events or other significant occurrences deemed problematic by management. These scenarios are incorporated into the Corporation's contingency funding plan, which provides the basis for the identification of its liquidity needs.
At December 31, 2023, the Corporation’s cash and cash equivalents position was approximately $222.0 million, including liquidity of $164.4 million held at the Federal Reserve. These excess funds, when combined with (i) available borrowing capacity of $3.6 billion from the Federal Home Loan Bank of Pittsburgh ("FHLB") and the Federal Reserve, and (ii) available unused commitments from brokered deposit sources and other third-party funding channels, including previously established lines of credit from correspondent banks, resulted in the total on-hand and contingent liquidity sources for the Corporation being approximately 4.0 times the estimated amount of adjusted uninsured deposit balances discussed above.
The following table summarizes the Corporation's net available liquidity and borrowing capacities as of December 31, 2023:

| Net Available
FHLB borrowing capacity (1) | $ | 993,798 |
Federal Reserve borrowing capacity (2) | 463,547 |
Brokered deposits (3) | 1,871,289 |
Other third-party funding channels (3) (4) | 243,790 |
Total net available liquidity and borrowing capacity | $ | 3,572,424 |

(1) Availability contingent on the FHLB activity-based stock ownership requirement
(2) Includes access to discount window, BIC program and Bank Term Funding Program
(3) Availability contingent on internal borrowing guidelines
(4) Availability contingent on correspondent bank approvals at time of borrowing
As of December 31, 2023, management is not aware of any events that are reasonably likely to have a material adverse effect on the Corporation's liquidity, capital resources or operations. In addition, management is not aware of any regulatory recommendations regarding liquidity that would have a material adverse effect on the Corporation.
In the ordinary course of business the Corporation has entered into contractual obligations and have made other commitments to make future payments. Refer to the accompanying notes to consolidated financial statements elsewhere in this report for the expected timing of such payments as of December 31, 2023. The Corporation’s material contractual obligations as of December 31, 2023 consist of (i) long-term borrowings - Note 10, "Borrowings," (ii) operating leases - Note 7, "Leases," (iii) time deposits with stated maturity dates - Note 9, "Deposits," and (iv) commitments to extend credit and standby letters of credit - Note 18, "Off-Balance Sheet Activities."
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Shareholders’ Equity, Capital Ratios and Metrics
Shareholders' Equity
On September 21, 2022, the Corporation successfully completed a common stock offering resulting in the issuance of 4,257,446 shares of common stock at $23.50 per share and net proceeds of $94.1 million after deducting the underwriting discount and customary offering expenses. The net proceeds from the capital raise will be used for general corporate purposes, including working capital and funding the Corporation's organic growth across its multiple geographic markets, or evaluating potential acquisition opportunities.
As of December 31, 2023, the Corporation’s total shareholders’ equity was $571.2 million, representing an increase of $40.5 million, or 7.6%, from December 31, 2022. The increase was primarily due to (i) improvements in accumulated other comprehensive losses resulting primarily from a reduction in after-tax temporary unrealized losses in the AFS investment portfolio, and (ii) an increase in the Corporation's retained earnings (quarterly net income, partially offset by the common and preferred dividends paid in the quarter). These were partially offset by an increase in the Corporation's treasury stock as a result of the Corporation's repurchase of 326,459 common shares during the twelve months of 2023.
Preferred Stock
During the year ended December 31, 2020, the Corporation raised $57.8 million, net of issuance costs, from the issuance of depositary shares, each representing a 1/40th ownership interest in a share of the Corporation's 7.125% Series A fixed rate non-cumulative perpetual preferred stock, no par value, with a liquidation preference of $1,000 per share of preferred stock. The $57.8 million qualifies as Tier 1 capital for regulatory capital purposes.
Capital Ratios and Metrics
The Corporation has complied with the standards of capital adequacy mandated by government regulations. Bank regulators have established "risk-based" capital requirements designed to measure capital adequacy. Risk-based capital ratios reflect the relative risks of various assets banks hold in their portfolios. A weight category (0% for the lowest risk assets and increasing for each tier of higher risk assets) is assigned to each asset on the balance sheet.
As of December 31, 2023, all of the Corporation's capital ratios exceeded regulatory "well-capitalized" levels. The Corporation’s capital ratios and book value per common share at December 31, 2023 and 2022 were as follows:

|  | December 31, 2023 |  | December 31, 2022
Total risk-based capital ratio |  | 15.99 | % |  | 16.08 | %
Tier 1 capital ratio |  | 13.20 | % |  | 13.24 | %
Common equity tier 1 ratio |  | 11.49 | % |  | 11.42 | %
Leverage ratio |  | 10.54 | % |  | 10.74 | %
Common shareholders' equity/total assets |  | 8.93 | % |  | 8.64 | %
Tangible common equity/tangible assets (1) |  | 8.22 | % |  | 7.90 | %
Book value per common share |  | $ | 24.57 |  |  | $ | 22.39 |
Tangible book value per common share (1) |  | $ | 22.46 |  |  | $ | 20.30 |

(1) Tangible common equity, tangible assets and tangible book value per common share are non-GAAP financial measures calculated using GAAP amounts. Tangible common equity is calculated by excluding the balance of goodwill and other intangible assets and preferred equity from the calculation of shareholders’ equity. Tangible assets is calculated by excluding the balance of goodwill and other intangible assets from the calculation of total assets. Tangible book value per common share is calculated by dividing tangible common equity by the number of shares outstanding. The Corporation believes that these non-GAAP financial measures provide information to investors that is useful in understanding its financial condition. Because not all companies use the same calculation of tangible common equity and tangible assets, this presentation may not be comparable to other similarly titled measures calculated by other companies. A reconciliation of these non-GAAP financial measures is provided in the "Non-GAAP Financial Measures" section in Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations.
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Average Balances, Interest Rates and Yields
The loan categories used to monitor and analyze interest income and yields are different than the portfolio segments used to determine the allowance for credit losses for loans. The allowance for credit losses was calculated by pooling loans of similar credit risk characteristics and credit monitoring procedures. See Note 1, "Summary of Significant Accounting Policies," and Note 3, "Loans Receivable and Allowance for Credit Losses," to the consolidated financial statements for more information about pooling of loans for the allowance for credit losses.
The following table presents average balances of certain measures of our financial condition and net interest margin for the specified years.

| December 31, 2023 |  | December 31, 2022 |  | December 31, 2021
| Average Balance | Annual Rate | Interest Inc./ Exp. |  | Average Balance | Annual Rate | Interest Inc./ Exp. |  | Average Balance | Annual Rate | Interest Inc./ Exp.
ASSETS: |  |  |  |  |  |  |  |  |  |  |
Securities: |  |  |  |  |  |  |  |  |  |  |
Taxable (1) (4) | $ | 720,818 |  | 1.89 | % | $ | 14,766 |  |  | $ | 768,959 |  | 1.80 | % | $ | 14,560 |  |  | $ | 624,330 |  | 1.70 | % | $ | 10,500 |
Tax-exempt (1) (2) (4) | 30,153 |  | 2.59 |  | 844 |  |  | 35,965 |  | 2.87 |  | 1,080 |  |  | 42,658 |  | 3.43 |  | 1,403 |
Equity securities (1) (2) | 10,005 |  | 5.09 |  | 509 |  |  | 8,248 |  | 2.13 |  | 176 |  |  | 8,136 |  | 3.58 |  | 291 |
Total securities (4) | 760,976 |  | 1.96 |  | 16,119 |  |  | 813,172 |  | 1.85 |  | 15,816 |  |  | 675,124 |  | 1.83 |  | 12,194 |
Loans receivable: |  |  |  |  |  |  |  |  |  |  |
Commercial (2) (3) | 1,501,202 |  | 6.63 |  | 99,587 |  |  | 1,429,634 |  | 5.08 |  | 72,684 |  |  | 1,284,750 |  | 4.95 |  | 63,642 |
Mortgage (2) (3) (5) | 2,765,484 |  | 5.77 |  | 159,606 |  |  | 2,355,662 |  | 4.78 |  | 112,583 |  |  | 2,080,000 |  | 4.51 |  | 93,738 |
Consumer (3) | 129,655 |  | 11.47 |  | 14,868 |  |  | 112,426 |  | 10.48 |  | 11,778 |  |  | 101,169 |  | 9.98 |  | 10,098 |
Total loans receivable (3) | 4,396,341 |  | 6.23 |  | 274,061 |  |  | 3,897,722 |  | 5.06 |  | 197,045 |  |  | 3,465,919 |  | 4.83 |  | 167,478 |
Other earning assets | 74,800 |  | 6.03 |  | 4,513 |  |  | 243,653 |  | 1.16 |  | 2,112 |  |  | 626,997 |  | 0.14 |  | 881 |
Total earning assets | 5,232,117 |  | 5.57 |  | $ | 294,693 |  |  | 4,954,547 |  | 4.30 |  | $ | 214,973 |  |  | 4,768,040 |  | 3.79 |  | $ | 180,553 |
Noninterest-bearing assets: |  |  |  |  |  |  |  |  |  |  |
Cash and due from banks | 54,824 |  |  |  |  | 51,670 |  |  |  |  | 48,673 |  |  |
Premises and equipment | 107,635 |  |  |  |  | 89,940 |  |  |  |  | 79,807 |  |  |
Other assets | 251,725 |  |  |  |  | 227,991 |  |  |  |  | 199,107 |  |  |
Allowance for credit losses | (44,930) |  |  |  |  | (39,935) |  |  |  |  | (36,727) |  |  |
Total noninterest-bearing assets | 369,254 |  |  |  |  | 329,666 |  |  |  |  | 290,860 |  |  |
TOTAL ASSETS | $ | 5,601,371 |  |  |  |  | $ | 5,284,213 |  |  |  |  | $ | 5,058,900 |  |  |
LIABILITIES AND SHAREHOLDERS’ EQUITY: |  |  |  |  |  |  |  |  |  |  |
Demand—interest-bearing | $ | 853,632 |  | 0.54 | % | $ | 4,626 |  |  | $ | 1,061,452 |  | 0.20 | % | $ | 2,131 |  |  | $ | 978,279 |  | 0.18 | % | $ | 1,783 |
Savings | 2,666,905 |  | 2.92 |  | 77,782 |  |  | 2,383,918 |  | 0.54 |  | 12,772 |  |  | 2,309,560 |  | 0.22 |  | 5,164 |
Time | 517,017 |  | 2.97 |  | 15,362 |  |  | 351,272 |  | 1.40 |  | 4,930 |  |  | 445,488 |  | 1.82 |  | 8,115 |
Total interest-bearing deposits | 4,037,554 |  | 2.42 |  | 97,770 |  |  | 3,796,642 |  | 0.52 |  | 19,833 |  |  | 3,733,327 |  | 0.40 |  | 15,062 |
Short-term borrowings | 35,224 |  | 5.07 |  | 1,787 |  |  | 8,793 |  | 4.20 |  | 369 |  |  | — |  | — |  | — |
Finance lease liabilities | 339 |  | 4.42 |  | 15 |  |  | 426 |  | 4.69 |  | 20 |  |  | 507 |  | 4.54 |  | 23 |
Subordinated notes and debentures | 104,735 |  | 4.10 |  | 4,295 |  |  | 104,432 |  | 3.69 |  | 3,857 |  |  | 108,963 |  | 4.35 |  | 4,735 |
Total interest-bearing liabilities | 4,177,852 |  | 2.49 |  | $ | 103,867 |  |  | 3,910,293 |  | 0.62 |  | $ | 24,079 |  |  | 3,842,797 |  | 0.52 |  | $ | 19,820 |
Demand—noninterest-bearing | 793,713 |  |  |  |  | 847,793 |  |  |  |  | 724,839 |  |  |
Other liabilities | 79,473 |  |  |  |  | 70,379 |  |  |  |  | 60,202 |  |  |
Total liabilities | 5,051,038 |  |  |  |  | 4,828,465 |  |  |  |  | 4,627,838 |  |  |
Shareholders’ equity | 550,333 |  |  |  |  | 455,748 |  |  |  |  | 431,062 |  |  |
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY | $ | 5,601,371 |  |  |  |  | $ | 5,284,213 |  |  |  |  | $ | 5,058,900 |  |  |
Interest income/Earning assets |  | 5.57 | % | $ | 294,693 |  |  |  | 4.30 | % | $ | 214,973 |  |  |  | 3.79 | % | $ | 180,553 |
Interest expense/Interest-bearing liabilities |  | 2.49 |  | 103,867 |  |  |  | 0.62 |  | 24,079 |  |  |  | 0.52 |  | 19,820 |
Net interest spread |  | 3.08 | % | $ | 190,826 |  |  |  | 3.68 | % | $ | 190,894 |  |  |  | 3.27 | % | $ | 160,733 |
Interest income/Earning assets |  | 5.57 | % | $ | 294,693 |  |  |  | 4.30 | % | $ | 214,973 |  |  |  | 3.79 | % | $ | 180,553 |
Interest expense/Earning assets |  | 1.96 |  | 103,867 |  |  |  | 0.48 |  | 24,079 |  |  |  | 0.41 |  | 19,820 |
Net interest margin (fully tax-equivalent) |  | 3.61 | % | $ | 190,826 |  |  |  | 3.82 | % | $ | 190,894 |  |  |  | 3.38 | % | $ | 160,733 |

(1) Includes unamortized discounts and premiums.
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(2) Average yields are stated on a fully taxable equivalent basis (calculated using statutory rates of 21%) resulting from tax-free municipal securities in the investment portfolio and tax-free municipal loans in the commercial loan portfolio. The taxable equivalent adjustment to net interest income for the years ended December 31, 2023, 2022, and 2021 were $997 thousand, $1.2 million and $953 thousand, respectively.
(3) Average loans receivable outstanding includes the average balance outstanding of all nonaccrual loans. Loans receivable consist of the average of total loans receivable less average unearned income. In addition, loans receivable interest income consists of loans receivable fees, including PPP deferred processing fees.
(4) Average balance is computed using the fair value of AFS debt securities and amortized cost of HTM debt securities. Average yield has been computed using amortized cost average balance for AFS and HTM debt securities. The adjustment to the average balance for securities in the calculation of average yield for the years ended December 31, 2023, 2022, and 2021 were $(61.1) million, $(40.3) million and $9.9 million, respectively.
(5) Includes loans held for sale.
Volume Analysis of Changes in Net Interest Income
The following table presents the change in net interest income for the years specified.

| Analysis of Year-to-Year Changes in Net Interest Income
| 2023 compared to. 2022 |  | 2022 compared to. 2021
| Increase (Decrease) Due to Change in (1) |  |  |  | Increase (Decrease) Due to Change in (1) |  |
| Volume |  | Rate |  | Net |  | Volume |  | Rate |  | Net
Assets |  |  |  |  |  |  |  |  |  |  |
Securities: |  |  |  |  |  |  |  |  |  |  |
Taxable | $ | (443) |  |  | $ | 649 |  |  | $ | 206 |  |  | $ | 3,291 |  |  | $ | 769 |  |  | $ | 4,060 |
Tax-Exempt (2) | (152) |  |  | (84) |  |  | (236) |  |  | (122) |  |  | (201) |  |  | (323) |
Equity Securities (2) | 37 |  |  | 296 |  |  | 333 |  |  | 5 |  |  | (120) |  |  | (115) |
Total Securities | (558) |  |  | 861 |  |  | 303 |  |  | 3,174 |  |  | 448 |  |  | 3,622 |
Loans: |  |  |  |  |  |  |  |  |  |  |
Commercial (2) | 3,634 |  |  | 23,269 |  |  | 26,903 |  |  | 7,183 |  |  | 1,859 |  |  | 9,042 |
Mortgage (2) | 19,645 |  |  | 27,378 |  |  | 47,023 |  |  | 12,485 |  |  | 6,360 |  |  | 18,845 |
Consumer | 1,806 |  |  | 1,284 |  |  | 3,090 |  |  | 1,118 |  |  | 562 |  |  | 1,680 |
Total Loans | 25,085 |  |  | 51,931 |  |  | 77,016 |  |  | 20,786 |  |  | (8,781) |  |  | 29,567 |
Other Earning Assets | (1,242) |  |  | 3,643 |  |  | 2,401 |  |  | (1,254) |  |  | 2,485 |  |  | 1,231 |
Total Earning Assets | $ | 23,285 |  |  | $ | 56,435 |  |  | $ | 79,720 |  |  | $ | 22,706 |  |  | $ | 11,714 |  |  | $ | 34,420 |
Liabilities and Shareholders’ Equity |  |  |  |  |  |  |  |  |  |  |
Interest Bearing Deposits |  |  |  |  |  |  |  |  |  |  |
Demand – Interest Bearing | $ | (417) |  |  | $ | 2,912 |  |  | $ | 2,495 |  |  | $ | 152 |  |  | $ | 196 |  |  | $ | 348 |
Savings | 1,516 |  |  | 63,494 |  |  | 65,010 |  |  | 166 |  |  | 7,442 |  |  | 7,608 |
Time | 2,326 |  |  | 8,106 |  |  | 10,432 |  |  | (1,716) |  |  | (1,469) |  |  | (3,185) |
Total Interest Bearing Deposits | 3,425 |  |  | 74,512 |  |  | 77,937 |  |  | (1,398) |  |  | 6,169 |  |  | 4,771 |
Short-Term Borrowings | 1,112 |  |  | 306 |  |  | 1,418 |  |  | — |  |  | 369 |  |  | 369 |
Finance Lease Liabilities | — |  |  | — |  |  | — |  |  | (4) |  |  | 1 |  |  | (3) |
Subordinated Debentures | (4) |  |  | (1) |  |  | (5) |  |  | (197) |  |  | (681) |  |  | (878) |
Total Interest Bearing Liabilities | $ | 4,533 |  |  | $ | 74,817 |  |  | $ | 79,350 |  |  | $ | (1,599) |  |  | $ | 5,858 |  |  | $ | 4,259 |
Change in Net Interest Income | $ | 18,752 |  |  | $ | (18,382) |  |  | $ | 370 |  |  | $ | 24,305 |  |  | $ | 5,856 |  |  | $ | 30,161 |

(1) The change in interest due to both volume and rate have been allocated entirely to volume changes.
(2) Changes in interest income on tax-exempt securities and loans are presented on a fully taxable-equivalent basis, using the Corporation’s marginal federal income tax rate of 21% for the year ended December 31, 2023 and 2022.
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Results of Operations
Year Ended December 31, 2023 vs. Year Ended December 31, 2022
Overview of the Statements of Income and Comprehensive Income
Net income available to common shareholders ("earnings") was $53.7 million, or $2.55 per diluted share, for the year ended December 31, 2023, compared to earnings of $58.9 million, or $3.26 per diluted share, for the year ended December 31, 2022. The decrease in diluted earnings per share in the year ended December 31, 2023 was primarily due to the rise in deposit costs year over year, as well as the dilutive effect of the Corporation's common stock offering completed in September 2022, which resulted in the issuance of over 4.2 million shares of common stock, an increase of approximately 25% in total common shares outstanding. In addition, during the year ended December 31, 2023, the Corporation repurchased 326,459 common shares at a weighted average price per share of $20.08, compared to repurchases of 50,166 common shares at a weighted average price per share of $26.75 during the year ended December 31, 2022. PPNR, a non-GAAP measure, was $77.8 million for the year ended December 31, 2023, compared to $86.8 million for the year ended December 31, 2022. The decrease in PPNR for the year ended December 31, 2023 compared to the year ended December 31, 2022 was primarily driven by the increase in deposit costs combined with the growth in technology expenses due to investments in applications aimed at enhancing both customer relationship management and customer online experience, as well as expanding service delivery channels. In addition, the Corporation had a year-over-year decrease in non-interest income as a result of lower pass-through income from small business investment companies ("SBICs").
Return on average equity was 10.54% for the year ended December 31, 2023, compared to 13.86% for the year ended December 31, 2022. Return on average tangible common equity, a non-GAAP measure, was 11.98% for the year ended December 31, 2023, compared to 16.64% for the year ended December 31, 2022.
The Corporation's efficiency ratio was 65.13% for the year ended December 31, 2023, compared to 61.32% for the year ended December 31, 2022. The efficiency ratio on a fully tax-equivalent basis, a non-GAAP ratio, was 64.45% for the year ended December 31, 2023, compared to 60.87% the year ended December 31, 2022. The increase was primarily the result of rising deposit costs coupled with higher occupancy costs and technology expenses.
Interest Income and Expense
Net interest income of $189.8 million for the year ended December 31, 2023, compared to $189.7 million for the year ended December 31, 2022. The increase of $170 thousand, or 0.09%, was primarily due to loan growth and the benefits of the impact of rising interest rates resulting in greater income on variable-rate loans and new loan production, which was substantially offset by an increase in the Corporation's interest expense as a result of both (i) targeted interest-bearing deposit rate increases to ensure both deposit growth and retention, and (ii) a year-over-year increase in the average balance of short-term borrowings through the FHLB. In addition, as previously mentioned, net interest income for the year ended December 31, 2023 included $1.4 million in nonrecurring interest income related primarily to payoffs in the syndicated loan portfolio.
Net interest margin was 3.63% and 3.83% for the years ended December 31, 2023 and 2022, respectively. Net interest margin on a fully tax-equivalent basis, a non-GAAP measure, was 3.61% and 3.82% for the years ended December 31, 2023 and 2022, respectively. Included in the net interest margin and the net interest margin on a fully tax-equivalent basis for the year ended December 31, 2023 was approximately $1.4 million, or three basis points, in one-time realized interest income related primarily to payoffs in the syndicated loan portfolio.
The yield on earning assets for the year ended December 31, 2023 was 5.57%, an increase of 127 basis points from December 31, 2022. The increase was primarily a result of loan growth and the net benefit of higher interest rates on both variable-rate loans and new loan production. The yield on earning assets for the year ended December 31, 2023 included the previously mentioned $1.4 million, or three basis points, in one-time syndicated loan interest income.
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Provision for Credit Losses
The Corporation recorded a provision for credit losses of $6.0 million in 2023 compared to $8.6 million in 2022. Included in the provision for credit losses for the year ended December 31, 2023, was a $156 thousand expense related to the allowance for unfunded commitments compared to $603 thousand for the year ended December 31, 2022. The $2.6 million reduction in the provision expense for the year ended December 31, 2023 compared to the year ended December 31, 2022 was primarily a result of the lower loan portfolio growth. Net loan charge-offs were $3.4 million during the year ended December 31, 2023, compared to $2.1 million during the year ended December 31, 2022. As disclosed in "Allowance for Credit Losses" discussion above, management estimates the allowance balance using relevant available information, from internal and external sources, relating to past events, current conditions, reasonable and supportable forecasts, and other significant qualitative and quantitative factors.
Management believes the charges to the provision for credit losses in 2023 were appropriate and the allowance for credit losses was adequate to absorb losses in the loan portfolio at December 31, 2023.
Non-Interest Income
Total non-interest income was $33.3 million for the year ended December 31, 2023, compared to $34.8 million for the year ended December 31, 2022. During the year ended December 31, 2023, notable changes compared to the year ended December 31, 2022 included lower net realized gains on the sale of AFS debt securities, lower mortgage banking income from reduced mortgage loan production volume in the higher-rate environment, lower level of full-year bank owned life insurance income and pass-through income from SBICs, partially offset by an increase in card processing and interchange income and a favorable variance in unrealized losses on equity securities.
Non-Interest Expense
For the year ended December 31, 2023, total non-interest expense was $145.3 million, compared to $137.6 million for the year ended December 31, 2022. The increase of $7.7 million, or 5.61%, from the year ended December 31, 2022 was primarily a result of higher occupancy costs combined with higher technology expenses. In addition, other non-interest expenses increased primarily due to business generation related expenses and consulting fees. Furthermore, full-year base-salary and related benefit increases, intended to account for inflationary merit increases and the addition of personnel to staff new offices in 2023, were substantially offset by an approximately $8.1 million reduction in incentive-related expenses.
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Year Ended December 31, 2022 vs. Year Ended December 31, 2021
Overview of the Statements of Income and Comprehensive Income
Earnings were $58.9 million, or $3.26 per diluted share, for the year ended December 31, 2022, compared to $53.4 million, or $3.16 per diluted share, for the year ended December 31, 2021, reflecting increases of $5.5 million, or 10.3%, and $0.10 per diluted share, or 3.2%. The 2022 full-year earnings per share was partially impacted by the effect of the Corporation's common stock offering completed in September 2022, resulting in the issuance of 4,257,446 shares of common stock at $23.50 per share and net proceeds of $94.1 million after deducting the underwriting discount and customary offering expenses. PPNR, a non-GAAP measure, was $86.8 million for the year ended December 31, 2022, compared to $76.8 million for the year ended December 31, 2021, reflecting an increase of $10.0 million, or 13.1%. The increase in PPNR for the year ended December 31, 2022 was primarily driven by growth in loans and expansion of the Corporation's net interest margin.
Return on average equity was 13.86% for the year ended December 31, 2022, compared to 13.39% for the year ended December 31, 2021. Return on average tangible common equity, a non-GAAP measure, was 16.64% and 16.23% for the same periods in 2022 and 2021, respectively.
The Corporation's efficiency ratio was 61.32% for the year ended December 31, 2022, compared to 60.26% for the year ended December 31, 2021, respectively. The efficiency ratio on a fully tax-equivalent basis, a non-GAAP ratio, was 60.87% for the year ended December 31, 2022, compared to 59.76% for the year ended December 31, 2021, respectively. The increase for the year ended December 31, 2022 was primarily a result of expected increasing costs associated with the Corporation’s expanding franchise investments into the Cleveland, Ohio and Southwest Virginia markets, coupled with its continued strategic investments in technologies focused on customer sales management and connectivity capabilities.
Interest Income and Expense
Net interest income of $189.7 million for the year ended December 31, 2022 increased $29.9 million, or 18.7%, from the year ended December 31, 2021, primarily as a result of loan growth throughout 2022 and the benefits of the impact of rising interest rates in 2022 resulting in greater income on variable-rate loans, coupled with net growth in the Corporation's investment portfolio. Included in net interest income were PPP-related fees, which totaled approximately $1.9 million for the year ended December 31, 2022, compared to $8.7 million for the year ended December 31, 2021.
Net interest margin was 3.83% and 3.35% for the years ended December 31, 2022 and 2021, respectively. Net interest margin on a fully tax-equivalent basis, a non-GAAP measure, was 3.82% and 3.38% for the years ended December 31, 2022 and 2021, respectively.
The yield on earning assets of 4.30% for the year ended December 31, 2022 increased 51 basis points from 3.79% for the year ended December 31, 2021, primarily as a result of loan growth, the repricing of variable rate loans, and the Corporation's redeployment of excess cash at the Federal Reserve to investment securities, partially offset by lower PPP-related fees in 2022 compared to 2021. The cost of interesting-bearing liabilities increased 10 basis points from 0.52% for the year ended December 31, 2021 to 0.62% for the year ended December 31, 2022, primarily as a result of the Corporation's targeted interest-bearing deposit rate increases.
Provision for Credit Losses
The Corporation recorded a provision for credit losses of $8.6 million in 2022 compared to $6.0 million in 2021. Included in the provision for credit losses for the year ended December 31, 2022 was $603 thousand expense related to the allowance for unfunded commitments compared to no accrual towards the allowance for unfunded commitments for the year ended December 31, 2021. Net loan charge-offs were $2.1 million during the year ended December 31, 2022, compared to $2.8 million during the year ended December 31, 2021. As disclosed in "Allowance for Credit Losses" discussion above, management estimates the allowance balance using relevant available information, from internal and external sources, relating to past events, current conditions, reasonable and supportable forecasts, and other significant qualitative and quantitative factors.
Management believes the charges to the provision for credit losses in 2022 were appropriate and the allowance for credit losses was adequate to absorb losses in the loan portfolio at December 31, 2022.
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Non-Interest Income
Total non-interest income was $34.8 million for the year ended December 31, 2022, representing an increase of $1.3 million, or 4.0%, from the same period in 2021. Included in non-interest income for the years ended December 31, 2022 and 2021 was $651 thousand and $783 thousand, respectively, in net realized gains on AFS debt securities. Non-interest income excluding net realized gains on AFS debt securities, a non-GAAP measure, for the year ended December 31, 2022 and the year ended December 31, 2021, increased $1.5 million, or 4.5%, from the same period in 2021. During the year ended December 31, 2022, Wealth and Asset Management fees increased $432 thousand, or 6.4%, compared to the year ended December 31, 2021, as the Corporation benefited from an increased number of wealth management relationships. Other notable increases during the year ended December 31, 2022 included increased income from service charges on deposits, other service charges and fees, pass-through income from SBICs and bank owned life insurance mostly due to an $883 thousand gain resulting from death benefit proceeds. These were partially offset by unrealized losses on equity securities and decreased mortgage banking activity.
Non-Interest Expense
For the year ended December 31, 2022, total non-interest expense was $137.6 million, reflecting an increase of $21.2 million, or 18.2%, from the year ended December 31, 2021, primarily as a result of (i) expansion of the Corporation's workforce in its growth regions of Cleveland, Ohio, Southwest Virginia, and Rochester, New York, (ii) increased investments in technology aimed at both enhancing customer experience and expanding service delivery channels, and (iii) the Corporation's sales management and increased legal and professional expenses.
Income Tax Expense
Income tax expense was $13.8 million in 2023, compared to $15.0 million in 2022 and $13.1 million in 2021. The effective tax rates were 19.2%, 19.2%, and 18.5% for 2023, 2022, and 2021, respectively. The effective tax rate for the periods differed from the federal statutory rate of 21.0% principally as a result of tax-exempt income from securities and loans as well as earnings from bank owned life insurance.
Off-Balance Sheet Arrangements
Assets under management and assets under custody are held in fiduciary or custodial capacity for the Corporation's clients. In accordance with GAAP, these assets are not included on the Corporation's balance sheet.
The Corporation is also party to financial instruments with off-balance sheet risk in the normal course of business to meet the financing needs of the Corporation's clients. These financial instruments include commitments to extend credit and standby letters of credit. Further discussion of these commitments is included Note 18, "Off-Balance Sheet Commitments and Contingencies."
Critical Accounting Policies and Estimates
The Corporation's consolidated financial statements are prepared in accordance with accounting principles GAAP and follow general practices within the industries in which the Corporation operates. The most significant accounting policies used by the Corporation are presented in Note 1, "Summary of Significant Accounting Policies," to the consolidated financial statements. Application of these principles requires management to make estimates or judgments that affect the amounts reported in the financial statements and accompanying notes. These estimates are based on information available as of the date of the financial statements; accordingly, as this information changes, the financial statements could reflect different estimates or judgments. In management’s opinion, some of these estimates and assumptions have a more significant impact than others on the Corporation's financial reporting. For the Corporation, these estimates and assumptions include accounting for the allowance for credit losses and goodwill.
Allowance for Credit Losses
The Corporation's allowance for credit losses is a critical accounting policy that requires the most significant judgments and estimates used in preparation of its consolidated financial statements. In determining the appropriate estimate for the allowance for credit losses, management considers a number of factors relative to both individually evaluated credits in the loan portfolio and macro-economic factors relative to the economy of the U.S. as a whole and the economies of the areas in which the Corporation does business.
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Management performs a quarterly evaluation of the adequacy of the allowance for credit losses. Management considers a variety of factors in establishing this estimate. This evaluation is inherently subjective as it requires material estimates by management that may be susceptible to significant change based on changes in economic and real estate market conditions.
The evaluation is comprised of specific and pooled components. The specific component is the Corporation's evaluation of credit loss on individually evaluated loans based on the fair value of the collateral less estimated selling costs if collateral dependent or based on the present value of expected future cash flows discounted at the loan's initial effective interest rate if not collateral dependent. The majority of the Corporation's loans subject to individual evaluation are considered collateral dependent. All other loans are evaluated collectively for credit loss by pooling loans based on similar risk characteristics.
As a significant percentage of the Corporation's loan portfolio is collateralized by real estate, appraisals of the underlying value of property securing loans are critical in determining the charge-offs for specific loans. Assumptions are instrumental in determining the value of properties. Overly optimistic assumptions or negative changes to assumptions could significantly affect the valuation of a property securing a loan and the related allowance determined. Management carefully reviews the assumptions supporting such appraisals to determine that the resulting values reasonably reflect amounts realizable on the related loans.
The pooled component of the evaluation is determined by applying reasonable and supportable economic forecasts and historical averages to the remaining loans segmented by similar risk characteristics. The key assumptions used in projecting future loss rates include the economic forecast, the forecast and reversion to mean time periods, and prepayment and curtailment assumptions. The assumptions are used to calculate and aggregate estimated cash flows for the time period that remains in each loan's contractual life. The cash flows are discounted back to the balance sheet date using each loan's effective yield, to arrive at a present value of future cash flows, which is compared to the amortized cost basis of the loan pool to determine the amount of allowance for credit loss required by the calculation.
One of the most significant judgments used in projecting loss rates when estimating the allowance for credit loss is the macro-economic forecast provided by a third party. The economic indices sourced from the macro-economic forecast and used in projecting loss rates are national unemployment rate and changes in home values. The economic index used in the calculation to which the calculation is most sensitive is the national unemployment rate. Changes in the macro-economic forecast, especially for the national unemployment rate, could significantly impact the calculated estimated credit losses between reporting periods.
Other key assumptions in the calculation of the allowance for credit loss include the forecast and reversion to mean time periods and prepayment and curtailment assumptions. The macro-economic forecast is applied for a reasonable and supportable time period before reverting to long-term historical averages for each economic index. The forecast and reversion to mean time period used for each economic index at December 31, 2023 were four quarters and eight quarters, respectively. Prepayment and curtailment assumptions are based on the Corporation's historical experience over the trailing 12 months and are adjusted by management as deemed necessary. The prepayment and curtailment assumptions vary based on segment.
The quantitative estimated losses are supplemented by more qualitative factors that impact potential losses. Qualitative factors include changes in underwriting standards, changes in environmental conditions, delinquency level, segment growth rates and changes in duration within new markets, or other relevant factors. The allowance for credit loss may be materially affected by these qualitative factors, especially during periods of economic uncertainty, for items not reflected in the lifetime credit loss calculation, but which are deemed appropriate by management's current assessment of the risks related to the loan portfolio and/or external factors. The qualitative factors applied at December 31, 2023, and the importance and levels of the qualitative factors applied, may change in future periods depending on the level of changes to items such as the uncertainty of economic conditions and management's assessment of the level of credit risk within the loan portfolio as a result of such changes, compared to the amount of allowance for credit loss calculated by the model. The evaluation of qualitative factors is inherently imprecise and requires significant management judgment.
While management utilizes its best judgment and information available, the adequacy of the allowance for credit loss is determined by certain factors outside of the Corporation's control, such as the performance of the Corporation's portfolios, changes in the economic environment including economic uncertainty, changes in interest rates, and the view of the regulatory authorities toward classification of assets and the level of allowance for credit loss. Additionally, the level of allowance for credit loss may fluctuate based on the balance and mix of the loan portfolio. If actual results differ significantly from management's assumptions, the Corporation's allowance for credit loss may not be sufficient to cover inherent losses in the Corporation's loan portfolio, resulting in additions to the Corporation's allowance for credit loss and an increase in the provision for credit losses.
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Fair Value Measurements
The Corporation uses fair value measurements to record certain financial instruments and to determine fair value disclosures. Equity securities, AFS debt securities, mortgage loans held for sale, and interest rate swap agreements are financial instruments recorded at fair value on a recurring basis. Additionally, from time to time, the Corporation may be required to record at fair value other financial assets on a nonrecurring basis. These nonrecurring fair value adjustments typically involve write-downs of, or specific reserves against, individual assets. GAAP establishes a three-level hierarchy for disclosure of assets and liabilities recorded at fair value. The classification of assets and liabilities within the hierarchy is based on whether the inputs to the valuation methodology used in the measurement are observable or unobservable. Observable inputs reflect market-driven or market-based information obtained from independent sources, while unobservable inputs reflect our estimates about market data.
The degree of management judgment involved in determining the fair value of a financial instrument is dependent upon the availability of quoted market prices or observable market data. For financial instruments that trade actively and have quoted market prices or observable market data, there is minimal subjectivity involved in measuring fair value. When observable market prices and data are not fully available, management judgment is necessary to estimate fair value. In addition, changes in the market conditions may reduce the availability of quoted prices or observable data. For example, reduced liquidity in the capital markets or changes in secondary market activities could result in observable market inputs becoming unavailable. Therefore, when market data is not available, we use valuation techniques that require more management judgment to estimate the appropriate fair value measurement. Fair value is discussed further in Note 1, "Summary of Significant Accounting Policies" and in Note 4, "Fair Value".
Goodwill
Certain intangible assets generated in connection with acquisitions are periodically assessed for impairment. Goodwill is tested at least annually for impairment, and if certain events occur which indicate goodwill might be impaired between annual tests, goodwill must be tested when such events occur. In making this assessment, the Corporation considers a number of factors including operating results, business plans, economic projections, anticipated future cash flows, current market data, stock price, etc. There are inherent uncertainties related to these factors and the Corporation's judgment in applying them to the analysis of goodwill impairment. Future changes in economic and operating conditions could result in goodwill impairment in subsequent periods.
Non-GAAP Financial Measures
The following tables reconcile the non-GAAP financial measures to their most directly comparable measures under GAAP.

| December 31, |  | December 31, |
| 2023 |  | 2022 |
Calculation of tangible book value per common share and tangible common equity / tangible assets (non-GAAP): |  |  |  |
Shareholders' equity | $ | 571,247 |  |  | $ | 530,762 |  |
Less: preferred equity | 57,785 |  |  | 57,785 |  |
Common shareholders' equity | 513,462 |  |  | 472,977 |  |
Less: goodwill and other intangibles | 43,874 |  |  | 43,749 |  |
Less: core deposit intangible | 280 |  |  | 364 |  |
Tangible common equity (non-GAAP) | $ | 469,308 |  |  | $ | 428,864 |  |
Total assets | $ | 5,752,957 |  |  | $ | 5,475,179 |  |
Less: goodwill and other intangibles | 43,874 |  |  | 43,749 |  |
Less: core deposit intangible | 280 |  |  | 364 |  |
Tangible assets (non-GAAP) | $ | 5,708,803 |  |  | $ | 5,431,066 |  |
Ending shares outstanding | 20,896,439 |  |  | 21,121,346 |  |
Book value per common share (GAAP) | $ | 24.57 |  |  | $ | 22.39 |  |
Tangible book value per common share (non-GAAP) | $ | 22.46 |  |  | $ | 20.30 |  |
Common shareholders' equity / Total assets (GAAP) | 8.93 | % |  | 8.64 | % |
Tangible common equity / Tangible assets (non-GAAP) | 8.22 | % |  | 7.90 | % |

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|  |  | Years Ended
|  |  | December 31,
|  |  |  |  | 2023 |  | 2022
Calculation of net interest margin: |  |  |  |  |  |  |
Interest income |  |  |  |  | $ | 293,696 |  |  | $ | 213,738 |
Interest expense |  |  |  |  | 103,867 |  |  | 24,079 |
Net interest income |  |  |  |  | $ | 189,829 |  |  | $ | 189,659 |
Average total earning assets |  |  |  |  | $ | 5,232,117 |  |  | $ | 4,954,547 |
Net interest margin (GAAP) |  |  |  |  | 3.63 | % |  | 3.83 | %
Calculation of net interest margin (fully tax equivalent basis) (non-GAAP): |  |  |  |  |  |  |
Interest income |  |  |  |  | $ | 293,696 |  |  | $ | 213,738 |
Tax equivalent adjustment (non-GAAP) |  |  |  |  | 997 |  |  | 1,235 |
Adjusted interest income (fully tax equivalent basis) (non-GAAP) |  |  |  |  | 294,693 |  |  | 214,973 |
Interest expense |  |  |  |  | 103,867 |  |  | 24,079 |
Net interest income (fully tax equivalent basis) (non-GAAP) |  |  |  |  | $ | 190,826 |  |  | $ | 190,894 |
Average total earning assets |  |  |  |  | $ | 5,232,117 |  |  | $ | 4,954,547 |
Less: average mark to market adjustment on investments (non-GAAP) |  |  |  |  | (61,089) |  |  | (40,271) |
Adjusted average total earning assets, net of mark to market (non-GAAP) |  |  |  |  | $ | 5,293,206 |  |  | $ | 4,994,818 |
Net interest margin, fully tax equivalent basis (non-GAAP) |  |  |  |  | 3.61 | % |  | 3.82 | %

|  |  | Years Ended
|  |  | December 31,
|  |  |  |  | 2023 |  | 2022
Calculation of PPNR (non-GAAP): (1) |  |  |  |  |  |  |
Net interest income |  |  |  |  | $ | 189,829 |  |  | $ | 189,659 |
Add: Non-interest income |  |  |  |  | 33,335 |  |  | 34,766 |
Less: Non-interest expense |  |  |  |  | 145,342 |  |  | 137,622 |
PPNR (non-GAAP) |  |  |  |  | $ | 77,822 |  |  | $ | 86,803 |
(1) Management believes that this is an important metric as it illustrates the underlying performance of the Corporation, it enables investors and others to assess the Corporation's ability to generate capital to cover credit losses through the credit cycle and provides consistent reporting with a key metric used by bank regulatory agencies.

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|  |  | Years Ended
|  |  | December 31,
|  |  |  |  | 2023 |  | 2022
Calculation of efficiency ratio: |  |  |  |  |  |  |
Non-interest expense |  |  |  |  | $ | 145,342 |  |  | $ | 137,622 |
Non-interest income |  |  |  |  | $ | 33,335 |  |  | $ | 34,766 |
Net interest income |  |  |  |  | 189,829 |  |  | 189,659 |
Total revenue |  |  |  |  | $ | 223,164 |  |  | $ | 224,425 |
Efficiency ratio |  |  |  |  | 65.13 | % |  | 61.32 | %
Calculation of efficiency ratio (fully tax equivalent basis) (non-GAAP): |  |  |  |  |  |  |
Non-interest expense |  |  |  |  | $ | 145,342 |  |  | $ | 137,622 |
Less: core deposit intangible amortization |  |  |  |  | 84 |  |  | 96 |
Adjusted non-interest expense (non-GAAP) |  |  |  |  | $ | 145,258 |  |  | $ | 137,526 |
Non-interest income |  |  |  |  | $ | 33,335 |  |  | $ | 34,766 |
Net interest income |  |  |  |  | 189,829 |  |  | 189,659 |
Less: tax exempt investment and loan income, net of TEFRA (non-GAAP) |  |  |  |  | 5,425 |  |  | 5,011 |
Add: tax exempt investment and loan income (fully tax equivalent basis) (non-GAAP) |  |  |  |  | 7,635 |  |  | 6,509 |
Adjusted net interest income (fully tax equivalent basis) (non-GAAP) |  |  |  |  | 192,039 |  |  | 191,157 |
Adjusted net revenue (fully tax equivalent basis) (non-GAAP) |  |  |  |  | $ | 225,374 |  |  | $ | 225,923 |
Efficiency ratio (fully tax equivalent basis) (non-GAAP) |  |  |  |  | 64.45 | % |  | 60.87 | %

|  |  | Years Ended
|  |  | December 31,
|  |  |  |  | 2023 |  | 2022
Calculation of return on average tangible common equity (non-GAAP): |  |  |  |  |  |  |
Net income |  |  |  |  | $ | 58,020 |  |  | $ | 63,188 |
Less: preferred stock dividends |  |  |  |  | 4,302 |  |  | 4,302 |
Net income available to common shareholders |  |  |  |  | $ | 53,718 |  |  | $ | 58,886 |
Average shareholders' equity |  |  |  |  | $ | 550,333 |  |  | $ | 455,748 |
Less: average goodwill & intangibles |  |  |  |  | 44,193 |  |  | 44,163 |
Less: average preferred equity |  |  |  |  | 57,785 |  |  | 57,785 |
Tangible common shareholders' equity (non-GAAP) |  |  |  |  | $ | 448,355 |  |  | $ | 353,800 |
Return on average equity (GAAP) |  |  |  |  | 10.54 | % |  | 13.86 | %
Return on average common equity (GAAP) |  |  |  |  | 9.76 | % |  | 12.92 | %
Return on average tangible common equity (non-GAAP) |  |  |  |  | 11.98 | % |  | 16.64 | %

|  |  | Years Ended
|  |  | December 31,
|  |  |  |  | 2023 |  | 2022
Calculation of non-interest income excluding net realized gains on available-for-sale securities (non-GAAP): |  |  |  |  |  |  |
Non-interest income |  |  |  |  | $ | 33,335 |  |  | $ | 34,766 |
Less: net realized gains on available-for-sale securities |  |  |  |  | 52 |  |  | 651 |
Adjusted non-interest income (non-GAAP) |  |  |  |  | $ | 33,283 |  |  | $ | 34,115 |

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ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The disclosures set forth in this item are qualified by Item 1A. Risk Factors and the section captioned “Forward-Looking Statements and Factors that Could Affect Future Results” included in Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations, of this report, and other cautionary statements set forth elsewhere in this report.
As a financial institution, the Corporation's primary source of market risk exposure is interest rate risk, which influences fluctuations in the Corporation's future earnings due to changes in interest rates. This risk is closely correlated to the repricing characteristics of the Corporation's portfolio of assets and liabilities, with each asset or liability repricing either at maturity or during the instrument's life cycle.
The Corporation’s interest rate risk measurement philosophy focuses on maintaining an appropriate balance between the theoretical and the practical, especially given that the primary objective of the Corporation’s overall asset/liability management process is to assess the level of interest rate risk in the Corporation’s balance sheet. Therefore, the Corporation models a set of interest rate scenarios capturing the financial effects of a range of plausible rate scenarios. The collective impact of these scenarios is designed to enable the Corporation to understand the nature and extent of its sensitivity to interest rate changes. Doing so necessitates an assessment of rate changes over varying time horizons and of varying/sufficient degrees such that the impact of embedded options within the balance sheet are sufficiently examined.
The Corporation has designed its interest rate risk measurement activities to include the following core elements: (i) interest rate ramps and shocks, (ii) parallel and non-parallel yield curve shifts, and (iii) a set of alternative rate scenarios, the nature of which change based upon prevailing market conditions.
The Corporation’s primary tools in managing Interest Rate Risk (“IRR”) are income simulation models. The income simulation models are utilized to quantify the potential impact of changing interest rates on earnings and to identify expected earnings trends given longer-term rate cycles. Standard gap reports are also utilized to provide supporting detailed information.
The Corporation also recognizes that a sustained environment of higher/lower interest rates will affect the underlying value of the Corporation’s assets, liabilities and off-balance sheet instruments since the present value of their future cash flows (and the cash flows themselves) change when interest rates change. In order to monitor the long-term structural and economic position of the balance sheet, the ALCO reviews the Economic Value of Equity measure on a quarterly basis.
IRR considerations include inherent assumptions and estimates, including the maturity and repricing characteristics of assets and liabilities, prepayments on amortizing assets, non-maturing deposit sensitivity, and loan and deposit pricing. These assumptions are subject to uncertainty due to the timing, magnitude, and frequency of rate changes, market conditions, and management strategies.
The following table demonstrate the annualized result of an interest rate simulation and the estimated effect that a parallel interest rate shift, or “shock,” in the yield curve and subjective adjustments in deposit pricing might have on the Corporation’s projected net interest income over the next 12 months. This simulation assumes that there is no growth in interest-earning assets or interest-bearing liabilities over the next 12 months. The changes to net interest income shown below are in compliance with the Corporation’s policy guidelines.

December 31, 2023 |  | December 31, 2022
Change in Basis Points |  | % Change in Net Interest Income |  | Change in Basis Points |  | % Change in Net Interest Income
300 |  | 2.6 |  | 300 |  | 4.9
200 |  | 3.8 |  | 200 |  | 5.5
100 |  | 4.6 |  | 100 |  | 5.8
(100) |  | (3.8) |  | (100) |  | (1.7)
(200) |  | (6.5) |  | (200) |  | (6.1)
(300) |  | (12.8) |  | (300) |  | (12.5)

At December 31, 2023, the Corporation has approximately $2.1 billion in outstanding loan balances that are rate sensitive over the next twelve months.
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ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Report of Independent Registered Public Accounting Firm
To the Shareholders, Board of Directors, and Audit Committee
CNB Financial Corporation
Clearfield, Pennsylvania
Opinion on the Consolidated Financial Statements
We have audited the accompanying consolidated balance sheets of CNB Financial Corporation (the “Corporation”) as of December 31, 2023, the related consolidated statements of income and comprehensive income, changes in shareholders’ equity, and cash flows for the years ended December 31, 2023 and 2022, and the related notes (collectively referred to as the “financial statements”). In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Corporation as of December 31, 2023, and the results of its operations and its cash flows for the year ended December 31, 2023, in conformity with accounting principles generally accepted in the United States of America.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (“PCAOB”), the Corporation’s internal control over financial reporting as of December 31, 2023, based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated March 7, 2024, expressed an unqualified opinion thereon.
Basis for Opinion
These financial statements are the responsibility of the Corporation’s management. Our responsibility is to express an opinion on the Corporation’s financial statements based on our audits.
We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Corporation in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud.
Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures include examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
Critical Audit Matters
The critical audit matters communicated below are matters arising from the current-period audit of the financial statements that were communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.
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Allowance for Credit Losses on Loans
As described in Notes 1 and 3 to the financial statements, the Corporation establishes an allowance representing the estimate of expected credit losses over the estimated life of the existing portfolio of loans. The Corporation measures expected credit losses based on a pooled loan basis when similar risk characteristics exist by primarily applying a discounted cash flow (“DCF”) model. The DCF model discounts instrument-level contractual cash flows, adjusting for prepayments and curtailments, and incorporates loss expectations based on past events, current conditions, and forecasted macroeconomic indicators using reasonable and supportable forecasts. The quantitative estimated losses provided by the DCF model are supplemented by qualitative factors that include changes related to relevant data, such as differences in underwriting standards, changes in environmental conditions, delinquency levels, segment growth rates and changes in duration within new markets, or other relevant factors not considered in the DCF model.
We identified the allowance for credit losses on loans as a critical audit matter. Auditing management’s estimate of the allowance involved a high degree of subjectivity due to the significant judgment required in determining the (1) significant assumptions within the DCF model and (2) measurement of the qualitative factors applied to the loan portfolio.
The primary procedures performed to address the critical audit matter included:
•We obtained an understanding, evaluated the design, and tested the operating effectiveness of the Corporation’s internal controls over the allowance for credit losses process, including controls over the qualitative elements of the allowance. This included controls over the review of the relevance and reliability of data used to determine the estimates and the review of the appropriateness of the key assumptions and judgments used in the determination of the qualitative factors.
•We evaluated the completeness and accuracy of data used in the development of qualitative factors and the reasonableness of management’s judgments and the relevance of data used in applying the qualitative factors.
•We evaluated the current and expected qualitative adjustments, including assessing the basis for the adjustments and the reasonableness of the significant assumptions.
•We tested of the loan review function and the accuracy of loan grades determined. Specifically, utilizing internal professionals to assist us in evaluating the appropriateness of loan grades.
Goodwill Impairment Assessment
The Corporation has recorded goodwill of $43.7 million as of December 31, 2023. The determination of the annual goodwill impairment assessment has been identified by the Corporation as a critical accounting policy. As further described in Notes 1 and 8 to the consolidated financial statements, goodwill is tested for impairment at least annually, occurring as of November 30, or more frequently if events or circumstances warrant. At November 30, 2023, the Corporation elected to perform a quantitative assessment to determine if it was more likely than not that the fair value exceeded its carrying value, including goodwill. The Corporation engaged a third-party valuation firm to assist in performing the quantitative analysis using multiple approaches that were weighted by management. Based upon the valuation prepared, the quantitative assessment indicated that it was more likely than not that the fair value exceeded its carrying value, resulting in no impairment.
We identified the Corporation’s quantitative goodwill impairment assessment, as of November 30, as a critical audit matter. The principal considerations for that determination were the degree of subjectivity and judgment required to audit management’s goodwill impairment assessment. Specifically, evaluating the valuation approaches selected and key assumptions used by management in performing its assessment, such as the selection of comparable publicly-traded companies and control premium utilized in the valuation approaches.
The primary procedures we performed to address this critical audit matter included the following:
•We evaluated the design and tested the operating effectiveness of controls related to management’s goodwill impairment assessment, including controls over management’s review of the quantitative analysis performed, including the key assumptions used to determine the fair value of the reporting unit.
•We tested key financial data used within the valuation approaches by agreeing key inputs to internal and external sources.
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•We evaluated, with the assistance of our internal valuation specialists, appropriateness of valuation approaches selected by management, the selection of a control premium and of comparable publicly-traded companies, and the overall reasonableness of the estimated fair value of the reporting unit.
Other Matter
The 2021 financial statements were audited by other auditors whose unqualified reports on those statements thereon, dated March 3, 2022, included an emphasis paragraph that described the change in accounting principle discussed in Note 1.

/s/ FORVIS, LLP |

We have served as the Corporation’s auditor since 2022.
Indianapolis, Indiana
March 7, 2024
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Report of Independent Registered Public Accounting Firm
To the Shareholders, Board of Directors, and Audit Committee
CNB Financial Corporation
Clearfield, Pennsylvania
Opinion on the Internal Control over Financial Reporting
We have audited CNB Financial Corporation’s (the “Corporation”) internal control over financial reporting as of December 31, 2023, based on criteria established in Internal Control – Integrated Framework: (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). In our opinion, the Corporation maintained, in all material respects, effective internal control over financial reporting as of December 31, 2023, based on criteria established in Internal Control – Integrated Framework: (2013) issued by COSO.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (“PCAOB”), the consolidated balance sheet of the Corporation as of December 31, 2023, and the related consolidated statement of income and comprehensive income, changes in shareholders’ equity, and cash flows for each of the year ended December 31, 2023, and our report dated March 7, 2024, expressed an unqualified opinion on those financial statements.
Basis for Opinion
The Corporation’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s Report on Internal Control Over Financing Reporting. Our responsibility is to express an opinion on the Corporation’s internal control over financial reporting based on our audit.
We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Corporation in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audit also included performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.
Definitions and Limitations of Internal Control over Financial Reporting
A corporation’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of reliable financial statements for external purposes in accordance with generally accepted accounting principles. A corporation’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the corporation; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the corporation are being made only in accordance with authorizations of management and directors of the corporation; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the corporation’s assets that could have a material effect on the financial statements.
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Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions or that the degree of compliance with the policies or procedures may deteriorate.

/s/ FORVIS, LLP |

Indianapolis, Indiana
March 7, 2024
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Report of Independent Registered Public Accounting Firm
Shareholders and the Board of Directors of CNB Financial Corporation
Clearfield, Pennsylvania
Opinion on the Financial Statements
We have audited the accompanying consolidated statements of income and comprehensive income, changes in shareholders’ equity, and cash flows of CNB Financial Corporation (the "Corporation") for the year ended December 31, 2021, and the related notes (collectively referred to as the "financial statements"). In our opinion, the financial statements present fairly, in all material respects, the results of its operations and its cash flows of the Corporation for the year ended December 31, 2021, in conformity with accounting principles generally accepted in the United States of America.
Basis for Opinion
These financial statements are the responsibility of the Corporation’s management. Our responsibility is to express an opinion on the Corporation’s financial statements based on our audit. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) ("PCAOB") and are required to be independent with respect to the Corporation in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audit included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audit also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audit provides a reasonable basis for our opinion.

| /s/ Crowe LLP

We served as the Corporation's auditor from 2000 through March 3, 2022.
Columbus, Ohio
March 3, 2022
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CONSOLIDATED BALANCE SHEETS
Dollars in thousands, except share data

| December 31, |  | December 31,
| 2023 |  | 2022
ASSETS
Cash and due from banks | $ | 54,789 |  |  | $ | 58,884 |
Interest-bearing deposits with Federal Reserve | 164,385 |  |  | 43,401 |
Interest-bearing deposits with other financial institutions | 2,872 |  |  | 4,000 |
Total cash and cash equivalents | 222,046 |  |  | 106,285 |
Debt securities available-for-sale, at fair value (amortized cost of $395,803 as of December 31, 2023 and $432,992 as of December 31, 2022) | 341,955 |  |  | 371,409 |
Debt securities held-to-maturity, at amortized cost (fair value $360,570 as of December 31, 2023 and $367,388, as of December 31, 2022) | 388,968 |  |  | 404,765 |
Equity securities | 9,301 |  |  | 9,615 |
Loans held for sale | 675 |  |  | 231 |
Loans receivable |  |  |
PPP loans, net of deferred processing fees | 48 |  |  | 159 |
Syndicated loans | 108,710 |  |  | 156,649 |
Loans | 4,359,718 |  |  | 4,118,370 |
Total loans receivable | 4,468,476 |  |  | 4,275,178 |
Less: allowance for credit losses | (45,832) |  |  | (43,436) |
Net loans receivable | 4,422,644 |  |  | 4,231,742 |
FHLB and other restricted stock holdings and investments | 30,011 |  |  | 30,715 |
Premises and equipment, net | 73,700 |  |  | 68,535 |
Operating lease right-of-use assets | 35,699 |  |  | 32,307 |
Bank owned life insurance | 114,468 |  |  | 111,523 |
Mortgage servicing rights | 1,554 |  |  | 1,804 |
Goodwill and other intangible assets | 43,874 |  |  | 43,749 |
Core deposit intangible | 280 |  |  | 364 |
Accrued interest receivable and other assets | 67,782 |  |  | 62,135 |
Total Assets | $ | 5,752,957 |  |  | $ | 5,475,179 |
LIABILITIES AND SHAREHOLDERS’ EQUITY
Noninterest-bearing demand deposits | $ | 728,881 |  |  | $ | 898,437 |
Interest-bearing demand deposits | 803,093 |  |  | 1,007,202 |
Savings | 2,960,282 |  |  | 2,270,337 |
Certificates of deposit | 506,494 |  |  | 446,461 |
Total deposits | 4,998,750 |  |  | 4,622,437 |
Short-term borrowings | — |  |  | 132,396 |
Subordinated debentures | 20,620 |  |  | 20,620 |
Subordinated notes, net of unamortized issuance costs | 84,267 |  |  | 83,964 |
Operating lease liabilities | 37,650 |  |  | 33,726 |
Accrued interest payable and other liabilities | 40,423 |  |  | 51,274 |
Total liabilities | 5,181,710 |  |  | 4,944,417 |
Commitments and contingent liabilities |  |  |
Preferred stock, Series A non-cumulative perpetual, No par value; $1,000 liquidation preference; shares authorized 60,375; Shares issued 60,375 at December 31, 2023 and 60,375 at December 31, 2022 | 57,785 |  |  | 57,785 |
Common stock, no par value; 50,000,000 shares authorized; Shares issued 21,235,503 shares at December 31, 2023 and 21,121,346 at December 31, 2022 | — |  |  | — |
Additional paid in capital | 220,495 |  |  | 221,553 |
Retained earnings | 345,935 |  |  | 306,911 |
Treasury stock, at cost (339,064 shares at December 31, 2023 and 114,157 shares at December 31, 2022) | (6,890) |  |  | (2,967) |
Accumulated other comprehensive loss | (46,078) |  |  | (52,520) |
Total shareholders’ equity | 571,247 |  |  | 530,762 |
Total Liabilities and Shareholders’ Equity | $ | 5,752,957 |  |  | $ | 5,475,179 |

See Notes to Consolidated Financial Statements

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CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME
Dollars in thousands, except per share data

| Year ended December 31,
| 2023 |  | 2022 |  | 2021
INTEREST AND DIVIDEND INCOME: |  |  |  |  |
Loans including fees |  |  |  |  |
Interest and fees on loans | $ | 273,220 |  |  | $ | 194,149 |  |  | $ | 157,799 |
Processing fees on PPP loans | 3 |  |  | 1,889 |  |  | 8,737 |
Securities and cash and cash equivalents: |  |  |  |  |
Taxable | 19,279 |  |  | 16,672 |  |  | 11,680 |
Tax-exempt | 724 |  |  | 871 |  |  | 1,125 |
Dividends | 470 |  |  | 157 |  |  | 259 |
Total interest and dividend income | 293,696 |  |  | 213,738 |  |  | 179,600 |
INTEREST EXPENSE: |  |  |  |  |
Deposits | 97,770 |  |  | 19,833 |  |  | 15,062 |
Borrowed funds and finance lease liabilities | 1,802 |  |  | 389 |  |  | 23 |
Subordinated debentures (includes $(151), $127, and $276 accumulated other comprehensive income reclassification for change in fair value of interest rate swap agreements, respectively) | 4,295 |  |  | 3,857 |  |  | 4,735 |
Total interest expense | 103,867 |  |  | 24,079 |  |  | 19,820 |
NET INTEREST INCOME | 189,829 |  |  | 189,659 |  |  | 159,780 |
PROVISION FOR CREDIT LOSS EXPENSE | 5,993 |  |  | 8,589 |  |  | 6,003 |
NET INTEREST INCOME AFTER PROVISION FOR CREDIT LOSS EXPENSE | 183,836 |  |  | 181,070 |  |  | 153,777 |
NON-INTEREST INCOME: |  |  |  |  |
Service charges on deposit accounts | 7,372 |  |  | 7,206 |  |  | 6,195 |
Other service charges and fees | 3,010 |  |  | 3,196 |  |  | 2,436 |
Wealth and asset management fees | 7,251 |  |  | 7,172 |  |  | 6,740 |
Net realized gains on available-for-sale securities (includes $52, $651, and $783 accumulated other comprehensive income reclassifications for net realized gains on available-for-sale securities, respectively) | 52 |  |  | 651 |  |  | 783 |
Net realized gains on equity securities | 22 |  |  | — |  |  | — |
Net unrealized gains (losses) on equity securities | (409) |  |  | (1,149) |  |  | 790 |
Mortgage banking | 676 |  |  | 1,237 |  |  | 3,147 |
Bank owned life insurance | 2,945 |  |  | 3,433 |  |  | 2,638 |
Card processing and interchange income | 8,301 |  |  | 7,797 |  |  | 7,796 |
Other non-interest income | 4,115 |  |  | 5,223 |  |  | 2,909 |
Total non-interest income | 33,335 |  |  | 34,766 |  |  | 33,434 |
NON-INTEREST EXPENSES: |  |  |  |  |
Compensation and benefits (includes $(174), $(113), and $(43) accumulated other comprehensive income reclassifications for net amortization of actuarial (gains) losses, respectively) | 71,062 |  |  | 71,460 |  |  | 61,175 |
Net occupancy expense | 14,509 |  |  | 13,298 |  |  | 12,381 |
Technology expense | 20,202 |  |  | 17,041 |  |  | 11,723 |
State and local taxes | 4,126 |  |  | 4,078 |  |  | 4,057 |
Legal, professional and examination fees | 4,414 |  |  | 4,173 |  |  | 3,517 |
Advertising | 3,133 |  |  | 2,887 |  |  | 2,081 |
FDIC insurance | 3,879 |  |  | 2,796 |  |  | 2,509 |
Card processing and interchange expenses | 5,025 |  |  | 4,801 |  |  | 3,836 |
Other non-interest expenses | 18,992 |  |  | 17,088 |  |  | 15,154 |
Total non-interest expenses | 145,342 |  |  | 137,622 |  |  | 116,433 |
INCOME BEFORE INCOME TAXES | 71,829 |  |  | 78,214 |  |  | 70,778 |
INCOME TAX EXPENSE (includes $79, $134, and $116 income tax expense reclassification items, respectively) | 13,809 |  |  | 15,026 |  |  | 13,071 |
NET INCOME | 58,020 |  |  | 63,188 |  |  | 57,707 |
PREFERRED STOCK DIVIDENDS | 4,302 |  |  | 4,302 |  |  | 4,302 |
NET INCOME AVAILABLE TO COMMON STOCKHOLDERS | $ | 53,718 |  |  | $ | 58,886 |  |  | $ | 53,405 |
PER COMMON SHARE DATA: |  |  |  |  |
Basic Earnings Per Common Share | $ | 2.56 |  |  | $ | 3.26 |  |  | $ | 3.16 |
Diluted Earnings Per Common Share | $ | 2.55 |  |  | $ | 3.26 |  |  | $ | 3.16 |
Cash Dividends Declared | $ | 0.700 |  |  | $ | 0.700 |  |  | $ | 0.685 |
NET INCOME | $ | 58,020 |  |  | $ | 63,188 |  |  | $ | 57,707 |
OTHER COMPREHENSIVE INCOME (LOSS): |  |  |  |  |
Net change in unrealized gains (losses) on available-for-sale securities, net of reclassification and tax | $ | 6,109 |  |  | $ | (53,576) |  |  | $ | (16,044) |
Amortization of unrealized gains from held-to-maturity securities, net of tax | 591 |  |  | 875 |  |  | — |
Change in actuarial gains (losses), for post-employment health care plan, net of amortization and tax | (139) |  |  | 150 |  |  | 275 |
Change in fair value of interest rate swap agreements designated as a cash flow hedge, net of interest and tax | (119) |  |  | 425 |  |  | 301 |
Total other comprehensive income (loss) | 6,442 |  |  | (52,126) |  |  | (15,468) |
COMPREHENSIVE INCOME | $ | 64,462 |  |  | $ | 11,062 |  |  | $ | 42,239 |

See Notes to Consolidated Financial Statements

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CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY
FOR THE YEARS ENDED DECEMBER 31, 2023, 2022, AND 2021
Dollars in thousands, except share and per share data

| Preferred Stock |  | Additional Paid-In Capital |  | Retained Earnings |  | Treasury Stock |  | Accumulated Other Comprehensive Income (Loss) |  | Total Share- holders’ Equity
Balance, January 1, 2021 | $ | 57,785 |  |  | $ | 127,518 |  |  | $ | 218,727 |  |  | $ | (2,967) |  |  | $ | 15,074 |  |  | $ | 416,137 |
Net income | — |  |  | — |  |  | 57,707 |  |  | — |  |  | — |  |  | 57,707 |
Other comprehensive loss | — |  |  | — |  |  | — |  |  | — |  |  | (15,468) |  |  | (15,468) |
Forfeiture of restricted stock award grants (2,669 shares) | — |  |  | 64 |  |  | — |  |  | (64) |  |  | — |  |  | — |
Restricted stock award grants (55,218 shares) | — |  |  | (1,374) |  |  | — |  |  | 1,374 |  |  | — |  |  | — |
Performance based restricted stock award grants (10,587 shares) | — |  |  | (262) |  |  | — |  |  | 262 |  |  | — |  |  | — |
Stock-based compensation expense | — |  |  | 1,411 |  |  | — |  |  | — |  |  | — |  |  | 1,411 |
Contribution of treasury stock (3,000 shares) | — |  |  | (81) |  |  | — |  |  | 81 |  |  | — |  |  | — |
Stock-based contribution expense | — |  |  | 75 |  |  | — |  |  | — |  |  | — |  |  | 75 |
Purchase of treasury stock (36,359 shares) | — |  |  | — |  |  | — |  |  | (1,000) |  |  | — |  |  | (1,000) |
Purchase of treasury stock for the purpose of tax withholding related to restricted stock award vesting (6,782 shares) | — |  |  | — |  |  | — |  |  | (143) |  |  | — |  |  | (143) |
Purchase of treasury stock for the purpose of tax withholding related to performance based restricted stock award vesting (941 shares) | — |  |  | — |  |  | — |  |  | (20) |  |  | — |  |  | (20) |
Preferred cash dividend declared | — |  |  | — |  |  | (4,302) |  |  | — |  |  | — |  |  | (4,302) |
Cash dividends declared ($0.685 per share) | — |  |  | — |  |  | (11,550) |  |  | — |  |  | — |  |  | (11,550) |
Balance, December 31, 2021 | 57,785 |  |  | 127,351 |  |  | 260,582 |  |  | (2,477) |  |  | (394) |  |  | 442,847 |
Net income | — |  |  | — |  |  | 63,188 |  |  | — |  |  | — |  |  | 63,188 |
Other comprehensive loss | — |  |  | — |  |  | — |  |  | — |  |  | (52,126) |  |  | (52,126) |
Forfeiture of restricted stock award grants (1,440 shares) | — |  |  | 36 |  |  | — |  |  | (36) |  |  | — |  |  | — |
Restricted stock award grants (57,823 shares) | — |  |  | (1,000) |  |  | — |  |  | 1,000 |  |  | — |  |  | — |
Performance based restricted stock award grants (11,895 shares) | — |  |  | (173) |  |  | — |  |  | 173 |  |  | — |  |  | — |
Stock-based compensation expense | — |  |  | 1,248 |  |  | — |  |  | — |  |  | — |  |  | 1,248 |
Contribution of treasury stock (3,000 shares) | — |  |  | (44) |  |  | — |  |  | 44 |  |  | — |  |  | — |
Stock-based contribution expense | — |  |  | 84 |  |  | — |  |  | — |  |  | — |  |  | 84 |
Issuance of common stock, net of issuance costs (4,257,446 shares) | — |  |  | 94,051 |  |  | — |  |  | — |  |  | — |  |  | 94,051 |
Purchase of treasury stock (50,166 shares) | — |  |  | — |  |  | — |  |  | (1,342) |  |  | — |  |  | (1,342) |
Purchase of treasury stock for the purpose of tax withholding related to restricted stock award vesting (7,568 shares) | — |  |  | — |  |  | — |  |  | (203) |  |  | — |  |  | (203) |
Purchase of treasury stock for the purpose of tax withholding related to performance based restricted stock award vesting (4,706 shares) | — |  |  | — |  |  | — |  |  | (126) |  |  | — |  |  | (126) |
Preferred cash dividend declared | — |  |  | — |  |  | (4,302) |  |  | — |  |  | — |  |  | (4,302) |
Common cash dividends declared ($0.70 per share) | — |  |  | — |  |  | (12,557) |  |  | — |  |  | — |  |  | (12,557) |
Balance, December 31, 2022 | 57,785 |  |  | 221,553 |  |  | 306,911 |  |  | (2,967) |  |  | (52,520) |  |  | 530,762 |

See Notes to Consolidated Financial Statements

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CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY (continued)
FOR THE YEARS ENDED DECEMBER 31, 2023, 2022, AND 2021
Dollars in thousands, except share and per share data

| Preferred Stock |  | Additional Paid-In Capital |  | Retained Earnings |  | Treasury Stock |  | Accumulated Other Comprehensive Income (Loss) |  | Total Share- holders’ Equity
Net income | — |  |  | — |  |  | 58,020 |  |  | — |  |  | — |  |  | 58,020 |
Other comprehensive income | — |  |  | — |  |  | — |  |  | — |  |  | 6,442 |  |  | 6,442 |
Forfeiture of restricted stock award grants (6,391 shares) | — |  |  | 134 |  |  | — |  |  | (134) |  |  | — |  |  | — |
Restricted stock award grants (105,185 shares) | — |  |  | (2,743) |  |  | — |  |  | 2,743 |  |  | — |  |  | — |
Performance based restricted stock award grants (4,118 shares) | — |  |  | (111) |  |  | — |  |  | 111 |  |  | — |  |  | — |
Stock-based compensation expense | — |  |  | 1,688 |  |  | — |  |  | — |  |  | — |  |  | 1,688 |
Contribution of treasury stock (3,000 shares) | — |  |  | (81) |  |  | — |  |  | 81 |  |  | — |  |  | — |
Stock-based contribution expense | — |  |  | 55 |  |  | — |  |  | — |  |  | — |  |  | 55 |
Purchase of treasury stock (326,459 shares) | — |  |  | — |  |  | — |  |  | (6,621) |  |  | — |  |  | (6,621) |
Purchase of treasury stock for the purpose of tax withholding related to restricted stock award vesting (3,776 shares) | — |  |  | — |  |  | — |  |  | (89) |  |  | — |  |  | (89) |
Purchase of treasury stock for the purpose of tax withholding related to performance based restricted stock award vesting (584 shares) | — |  |  | — |  |  | — |  |  | (14) |  |  | — |  |  | (14) |
Preferred cash dividend declared | — |  |  | — |  |  | (4,302) |  |  | — |  |  | — |  |  | (4,302) |
Cash dividends declared ($0.70 per common share) | — |  |  | — |  |  | (14,694) |  |  | — |  |  | — |  |  | (14,694) |
Balance, December 31, 2023 | $ | 57,785 |  |  | $ | 220,495 |  |  | $ | 345,935 |  |  | $ | (6,890) |  |  | $ | (46,078) |  |  | $ | 571,247 |

See Notes to Consolidated Financial Statements

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CONSOLIDATED STATEMENTS OF CASH FLOWS
Dollars in thousands

| Year ended December 31,
| 2023 |  | 2022 |  | 2021
CASH FLOWS FROM OPERATING ACTIVITIES: |  |  |  |  |
Net income | $ | 58,020 |  |  | $ | 63,188 |  |  | $ | 57,707 |
Adjustments to reconcile net income to net cash provided by operations: |  |  |  |  |
Provision for credit loss expense | 5,993 |  |  | 8,589 |  |  | 6,003 |
Depreciation and amortization of premises and equipment, operating leases assets, core deposit intangible, and mortgage servicing rights | 7,739 |  |  | 6,573 |  |  | 6,241 |
Accretion of securities, deferred loan fees and costs, net yield and credit mark on acquired loans, and unearned income | (3,155) |  |  | (3,316) |  |  | (2,127) |
Net amortization of deferred costs on borrowings | 303 |  |  | 303 |  |  | 177 |
Accretion of deferred PPP processing fees | (3) |  |  | (1,889) |  |  | (8,737) |
Deferred tax (benefit) expense | 1,111 |  |  | (1,814) |  |  | (1,691) |
Net realized gains on sales of available-for-sale securities | (52) |  |  | (651) |  |  | (783) |
Net realized and unrealized losses (gains) on equity securities | 387 |  |  | 1,149 |  |  | (790) |
Gain on sale of loans held for sale | (447) |  |  | (1,285) |  |  | (2,737) |
Net losses (gains) on dispositions of premises and equipment and foreclosed assets | 27 |  |  | (170) |  |  | 230 |
Proceeds from sale of loans receivable | 16,263 |  |  | 29,151 |  |  | 95,258 |
Origination of loans held for sale | (17,874) |  |  | (34,181) |  |  | (95,411) |
Income on bank owned life insurance | (2,945) |  |  | (2,550) |  |  | (2,184) |
Gain on bank owned life insurance (death benefit proceeds in excess of cash surrender value) | — |  |  | (883) |  |  | (454) |
Restricted stock compensation expense | 1,688 |  |  | 1,248 |  |  | 1,411 |
Stock-based contribution expense | 55 |  |  | 84 |  |  | 75 |
Changes in: |  |  |  |  |
Accrued interest receivable and other assets | (5,894) |  |  | (19,065) |  |  | (1,056) |
Accrued interest payable, lease liabilities, and other liabilities | (14,193) |  |  | 19,572 |  |  | 7,788 |
NET CASH PROVIDED BY OPERATING ACTIVITIES | 47,023 |  |  | 64,053 |  |  | 58,920 |
CASH FLOWS FROM INVESTING ACTIVITIES: |  |  |  |  |
Proceeds from maturities, prepayments and calls of available-for-sale securities | 42,726 |  |  | 70,033 |  |  | 170,962 |
Proceeds from sales of available-for-sale securities | 13,151 |  |  | 22,164 |  |  | 33,553 |
Proceeds from sale of equity securities | 296 |  |  | — |  |  | — |
Purchase of available-for-sale securities | (19,253) |  |  | (48,433) |  |  | (341,140) |
Proceeds from maturities, prepayments and calls of held-to-maturity securities | 16,806 |  |  | 23,995 |  |  | — |
Purchases of held-to-maturity securities | — |  |  | (213,853) |  |  | — |
Purchase of equity securities | (369) |  |  | (398) |  |  | (407) |
Proceeds from loans held for sale previously classified as portfolio loans | 4,994 |  |  | — |  |  | 1,921 |
Net increase in loans receivable | (197,594) |  |  | (630,605) |  |  | (246,043) |
Purchase of bank owned life insurance | — |  |  | (11,644) |  |  | (22,000) |
Proceeds from death benefit of bank owned life insurance policies | — |  |  | 3,273 |  |  | 1,390 |
Redemption (purchase) of FHLB, other equity, and restricted equity interests | 704 |  |  | (7,439) |  |  | (2,258) |
Purchase of premises and equipment | (10,847) |  |  | (12,290) |  |  | (6,484) |
Proceeds from the sale of premises and equipment and foreclosed assets | 52 |  |  | 496 |  |  | 746 |
Purchase of other intangibles | (125) |  |  | — |  |  | — |
NET CASH USED BY INVESTING ACTIVITIES | (149,459) |  |  | (804,701) |  |  | (409,760) |
CASH FLOWS FROM FINANCING ACTIVITIES: |  |  |  |  |
Net increase (decrease) in checking, money market and savings accounts | 316,280 |  |  | (153,191) |  |  | 623,967 |
Net increase (decrease) in certificates of deposit | 60,033 |  |  | 60,009 |  |  | (90,092) |
Purchase of treasury stock | (6,724) |  |  | (1,671) |  |  | (1,163) |
Proceeds from common stock offering, net of issuance costs | — |  |  | 94,051 |  |  | — |
Cash dividends paid, common stock | (14,694) |  |  | (12,557) |  |  | (11,550) |
Cash dividends paid, preferred stock | (4,302) |  |  | (4,302) |  |  | (4,302) |
Proceeds from issuance of subordinated notes, net of issuance costs | — |  |  | — |  |  | 83,484 |
Repayments on long-term borrowings | — |  |  | — |  |  | (50,000) |
Net change in short-term borrowings | (132,396) |  |  | 132,396 |  |  | — |
NET CASH PROVIDED BY FINANCING ACTIVITIES | 218,197 |  |  | 114,735 |  |  | 550,344 |
NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS | 115,761 |  |  | (625,913) |  |  | 199,504 |
CASH AND CASH EQUIVALENTS, Beginning | 106,285 |  |  | 732,198 |  |  | 532,694 |
CASH AND CASH EQUIVALENTS, Ending | $ | 222,046 |  |  | $ | 106,285 |  |  | $ | 732,198 |

See Notes to Consolidated Financial Statements

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CONSOLIDATED STATEMENTS OF CASH FLOWS (continued)
Dollars in thousands

| Year ended December 31,
| 2023 |  | 2022 |  | 2021
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: |  |  |  |  |
Cash paid during the period for: |  |  |  |  |
Interest | $ | 102,156 |  |  | $ | 26,804 |  |  | $ | 20,030 |
Income taxes | 12,006 |  |  | 17,423 |  |  | 11,788 |
SUPPLEMENTAL NONCASH DISCLOSURES: |  |  |  |  |
Transfers to other real estate owned | $ | 874 |  |  | $ | 785 |  |  | $ | 1,470 |
Transfers from loans held for sale to loans held for investment | 1,666 |  |  | 6,448 |  |  | 9,965 |
Transfers from loans held for investment to loans held for sale | 166 |  |  | — |  |  | 1,921 |
Transfer of securities from available-for-sale to held-to-maturity | — |  |  | 220,757 |  |  | — |
Grant of restricted stock awards from treasury stock | 2,743 |  |  | 1,000 |  |  | 1,374 |
Grant of performance based restricted stock awards from treasury stock | 111 |  |  | 173 |  |  | 262 |
Restricted stock forfeiture | 134 |  |  | 36 |  |  | 64 |
Contribution of stock from treasury stock | 81 |  |  | 44 |  |  | 81 |
Lease liabilities arising from obtaining right-of-use assets | 5,001 |  |  | 13,371 |  |  | 2,643 |

See Notes to Consolidated Financial Statements

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Notes to Consolidated Financial Statements
1. Summary of Significant Accounting Policies
Unless otherwise indicated, dollar amounts in tables are stated in thousands, except for per share amounts.
Business and Organization
CNB Financial Corporation (the "Corporation") is headquartered in Clearfield, Pennsylvania, and provides a full range of banking and related services through its wholly owned subsidiary, CNB Bank (the "Bank"). In addition, the Bank provides wealth and asset management services, including the administration of trusts and estates, retirement plans, and other employee benefit plans as well as a full range of wealth management services. The Bank serves individual and corporate customers and is subject to competition from other financial institutions and intermediaries with respect to these services. In addition to the Bank, the Corporation also operates a consumer discount loan and finance business through its wholly owned subsidiary, Holiday Financial Services Corporation ("Holiday"). The Corporation and its other subsidiaries are subject to examination by federal and state regulators. The Corporation’s market area is primarily concentrated in the Central and Northwest regions of the Commonwealth of Pennsylvania, the Central and Northeast regions of the State of Ohio, Western region of the State of New York and the Southwest region of the Commonwealth of Virginia.
Basis of Financial Presentation
The financial statements are consolidated to include the accounts of the Corporation, the Bank, CNB Securities Corporation, Holiday, CNB Risk Management, Inc. and CNB Insurance Agency. All significant intercompany accounts and transactions have been eliminated in the consolidated financial statements.
Subsequent Events
The Corporation has evaluated subsequent events for recognition and disclosure through the date these consolidated financial statements were issued.
Use of Estimates
To prepare financial statements in conformity with U.S. generally accepted accounting principles ("GAAP"), management makes estimates and assumptions based on available information. These estimates and assumptions affect the amounts reported in the financial statements and the disclosures provided, and actual results could differ. The allowance for credit losses on loans receivable and off-balance-sheet credit exposures, the fair values of financial instruments, goodwill and the status of contingencies are particularly subject to change.
Operating Segments
While the Corporation's Chief Operating Decision Maker ("CODM") monitors the revenue streams of the various products and services, operations are managed and financial performance is evaluated on a Corporation-wide basis, and operating divisions are aggregated into one as operating results for all divisions are similar. Accordingly, all of the financial service operations are considered by management to be aggregated in one reportable operating segment.
Cash and Cash Equivalents
For purposes of the consolidated statement of cash flows, the Corporation defines cash and cash equivalents as cash and due from banks and interest bearing deposits with the Federal Reserve and other financial institutions. Net cash flows are reported for customer loan and deposit transactions, interest bearing time deposits with other financial institutions and borrowings with original maturities of 90 days or less.
Interest-Bearing Deposits in Other Financial Institutions
Interest-bearing deposits in other financial institutions are carried at cost.
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Restrictions on Cash
Note 17, "Derivative Instruments," to the consolidated financial statements discloses the cash collateral balances required to be maintained in connection with the Corporation’s interest rate swaps.
Debt Securities
Debt securities are classified as held-to-maturity ("HTM") and carried at amortized cost when management has the positive intent and ability to hold them to maturity. Debt securities are classified as available-for-sale ("AFS") when they might be sold before maturity. AFS debt securities are carried at fair value, with unrealized holding gains and losses reported in other comprehensive income, net of tax.
Interest income includes amortization of purchase premium or discount. Premiums and discounts on securities are amortized on the level-yield method without anticipating prepayments, except for mortgage backed securities where prepayments are anticipated. Premiums on callable debt securities are amortized to their earliest call date. Gains and losses on sales are recorded on the trade date and determined using the specific identification method.
The Corporation has made a policy election to exclude accrued interest from the amortized cost basis of debt securities and report accrued interest separately in accrued interest receivable and other assets in the consolidated balance sheets. A debt security is placed on nonaccrual status at the time any principal or interest payments become more than 90 days delinquent or if full collection of interest or principal becomes uncertain. Accrued interest for a security placed on nonaccrual is reversed against interest income. There was no accrued interest related to debt securities reversed against interest income for the years ended December 31, 2023 and 2022, respectively.
Allowance for Credit Losses (AFS Debt Securities)
For AFS debt securities in an unrealized loss position, the Corporation first assesses whether it intends to sell, or it is more likely than not that it will be required to sell the security before recovery of its amortized cost basis. If either of the criteria regarding intent or requirement to sell is met, the security's amortized cost basis is written down to fair value through income. For AFS debt securities that do not meet the aforementioned criteria, the Corporation evaluates whether the decline in fair value has resulted from credit losses or other factors. In making this assessment, management considers the extent to which fair value is less than amortized cost, any changes to the rating of the security by a rating agency, and adverse conditions specifically related to the security, among other factors. If this assessment indicates that a credit loss exists, the present value of cash flows expected to be collected from the security are compared to the amortized cost basis of the security. If the present value of cash flows expected to be collected is less than the amortized cost basis, a credit loss exists and an allowance for credit losses is recorded for the credit loss, limited by the amount that the fair value is less than the amortized cost basis. Any impairment that has not been recorded through an allowance for credit losses is recognized in other comprehensive income.
Changes in the allowance for credit losses are recorded as provision for (or reversal of) credit loss expense. Losses are charged against the allowance when management confirms that an AFS security is uncollectable or when either of the criteria regarding intent or requirement to sell is met. As of December 31, 2023 and December 31, 2022, the Corporation determined that the unrealized loss positions in AFS debt securities were not the result of credit losses, and therefore, an allowance for credit losses was not recorded. See Note 2, "Securities," and Note 4, "Fair Value," for more information about AFS debt securities.
Accrued interest receivable on AFS debt securities totaled $1.4 million and $1.5 million at December 31, 2023 and December 31, 2022, respectively, and was reported in accrued interest receivable and other assets on the consolidated balance sheets.
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Allowance for Credit Losses (HTM Debt Securities)
Management measures expected credit losses on HTM debt securities on a collective basis by major security type.
Accrued interest receivable on HTM debt securities totaled $1.3 million and $1.3 million at December 31, 2023 and 2022, respectively, and was reported in accrued interest receivable and other assets on the consolidated balance sheets and is excluded from the estimate of credit losses.
Management classifies the HTM portfolio into the following major security types: U.S. government sponsored entities and residential & multi-family mortgages. All of the residential & multi-family mortgages held by the Corporation are issued by U.S. government entities and agencies. These securities are either explicitly or implicitly guaranteed by the U.S. government, are highly rated by major rating agencies and have a long history of no credit losses.
Equity Securities
Equity securities are carried at fair value, with changes in fair value reported in net income. Equity securities without readily determinable fair values are carried at cost, minus impairment, if any, plus or minus changes resulting from observable price changes in orderly transactions for the identical or a similar investment.
Loans Held for Sale
Loans originated and intended for sale in the secondary market are carried at the lower of aggregate cost or fair value, as determined by outstanding commitments from investors. Net unrealized losses, if any, are recorded as a valuation allowance and charged to earnings.
Mortgage loans held for sale are generally sold with servicing rights retained. The carrying value of the mortgage loan sold is reduced by the amount allocated to the servicing right. Gains and losses on sales of mortgage loans are based on the difference between the selling price and the carrying value of the related loan sold.
Loans
Loans that management has the intent and ability to hold for the foreseeable future or until maturity or payoff are reported at amortized cost. Amortized cost is the principal balance outstanding, net of purchase premiums and discounts, deferred loan fees and costs. Accrued interest receivable totaled $21.6 million and $17.3 million at December 31, 2023 and December 31, 2022, respectively, and was reported in accrued interest receivable and other assets on the consolidated balance sheets and is excluded from the estimate of credit losses. Interest income is accrued on the unpaid principal balance. Loan origination fees, net of certain direct origination costs, are deferred and recognized in interest income using the level-yield method without anticipating prepayments.
Interest income on mortgage, consumer and commercial loans is discontinued and placed on nonaccrual status at the time the loan is 90 days delinquent unless the loan is well secured and in process of collection. Past-due status is based on the contractual terms of the loan. Loans, including loans modified in a troubled debt restructuring, are placed on nonaccrual or recorded as charge-offs at an earlier date if collection of principal or interest is considered doubtful.
All interest accrued but not received on loans placed on nonaccrual is reversed against interest income. Interest received on such loans is accounted for on the cash-basis or cost-recovery method, until qualifying for return to accrual. Under the cost-recovery method, interest income is not recognized until the loan balance is reduced to zero. Under the cash-basis method, interest income is recorded when the payment is received in cash. For all portfolio segments, loans are returned to accrual status when all the principal and interest amounts contractually due are brought current and future payments are reasonably assured.
Purchased Credit Deteriorated ("PCD") Loans
The Corporation has purchased loans, some of which have experienced more than insignificant credit deterioration since origination.
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PCD loans are recorded at the amount paid. An allowance for credit losses is determined using the same methodology as other loans held for investment. The initial allowance for credit losses determined on a collective basis is allocated to individual loans. The sum of the loan's purchase price and allowance for credit losses becomes its initial amortized cost basis. The difference between the initial amortized cost basis and the par value of the loan is a noncredit discount or premium, which is amortized into interest income over the life of the loan. Subsequent changes to the allowance for credit losses are recorded through provision expense.
Concentration of Credit Risk
Most of the Corporation’s business activity is with customers located within the Commonwealth of Pennsylvania and the states of Ohio, New York and Virginia. Therefore, the Corporation’s exposure to credit risk is significantly affected by changes in the economies of Pennsylvania, Ohio, New York and Virginia. At December 31, 2023 no industry concentration existed which exceeded 10% of the total loan portfolio.
Allowance for Credit Losses - Loans
The allowance for credit losses on loans represents management’s estimate of expected credit losses over the estimated life of our existing portfolio of loans. The allowance for credit losses is a valuation account that is deducted from the loan's amortized cost basis to present the net amount expected to be collected on the loans.
The expense for credit loss recorded through earnings is the amount necessary to maintain the allowance for credit losses on loans at the amount of expected credit losses inherent within the loan portfolio. Loans are recorded as charge-offs against the allowance when management confirms a loan balance is uncollectable. Expected recoveries do not exceed the aggregate of amounts previously charged-off and expected to be charged-off.
Management estimates the allowance balance using relevant available information, from internal and external sources, relating to past events, current conditions, and reasonable and supportable forecasts, and other significant qualitative and quantitative factors. Historical credit loss experience provides the basis for the estimation of expected credit losses. Adjustments to historical loss information are made for differences in current loan-specific risk characteristics such as differences in underwriting standards, changes in environmental conditions, delinquency level, segment growth rates and changes in duration within new markets, or other relevant factors. For further information on the allowance for credit losses on loans, see Note 3, "Loans Receivable and Allowance for Credit Losses," for additional detail.
The allowance for credit losses is measured on a collective (pool) basis when similar risk characteristics exist. The Corporation has segregated its portfolio segments based on federal call report codes which classify loans based on the primary collateral supporting the loan. The following are the Corporation's segmented portfolios:
1-4 Family Construction: The Bank originates construction loans to finance 1-4 family residential buildings. Construction loans include not only construction of new structures, but also additions or alterations to existing structures and the demolition of existing structures to make way for new structures. Construction loans are generally secured by real estate. The primary risk characteristics are specific to the uncertainty on whether the construction will be completed according to the specifications and schedules. Factors that may influence the completion of construction may be customer specific, or related to changes in general economic conditions.
Other construction loans and all land development and other land loans: The Bank originates construction loans to finance land development preparatory to erecting new structures or the on-site construction of industrial, commercial, or multi-family buildings. Construction loans include not only construction of new structures, but also additions or alterations to existing structures and the demolition of existing structures to make way for new structures. Construction loans are generally secured by real estate. The primary risk characteristics are specific to the uncertainty on whether the construction will be completed according to the specifications and schedules. Factors that may influence the completion of construction may be customer specific, such as the quality and depth of property management, or related to changes in general economic conditions.
Farmland (including farm residential and other improvements): The Bank originates loans secured by farmland and improvements thereon, secured by mortgages. Farmland includes all land known to be used or usable for agricultural purposes, such as crop and livestock production. Farmland also includes grazing or pasture land, whether tillable or not and whether wooded or not. The primary risk characteristics are specific to the uncertainty on production, market, financial, environmental and human resources.
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Home equity lines of credit: The primary risk characteristics associated with home equity lines of credit typically involve changes to the borrower, including unemployment or other loss of income; unexpected significant expenses, such as major medical expenses, catastrophic events, divorce and death. Home equity lines of credit are typically originated with variable or floating interest rates, which could expose the borrower to higher payments in a rising interest rate environment. Real estate values could decrease and cause the value of the underlying property to fall below the loan amount, creating additional potential loss exposure for the Bank.
Residential Mortgages secured by first liens: The Bank originates one-to-four family residential mortgage loans primarily within Central and Northwest Pennsylvania, Central and Northeast Ohio, Western New York, and Southwest Virginia market. These loans are secured by first liens on a primary residence or investment property. The primary risk characteristics associated with residential mortgage loans typically involve major changes to the borrower, including unemployment or other loss of income; unexpected significant expenses, such as major medical expenses, catastrophic events, divorce or death. Residential mortgage loans that have adjustable rates could expose the borrower to higher payments in a rising interest rate environment. Real estate values could decrease and cause the value of the underlying property to fall below the loan amount, creating additional potential loss exposure for the Bank.
Residential Mortgages secured by junior liens: The Bank originates loans secured by junior liens against one to four family properties primarily within Central and Northwest Pennsylvania, Central and Northeast Ohio, Western New York, and Southwest Virginia market. Loans secured by junior liens are primarily in the form of an amortizing home equity loan. These loans are subordinate to a first mortgage which may be from another lending institution. The primary risk characteristics associated with loans secured by junior liens typically involve major changes to the borrower, including unemployment or other loss of income, unexpected significant expenses, such as for major medical expenses, catastrophic events, divorce or death. Real estate values could decrease and cause the value of the property to fall below the loan amount, creating additional potential loss exposure for the Bank.
Multifamily (5 or more) residential properties: The Bank originates mortgage loans for multifamily properties primarily within Central and Northwest Pennsylvania, Central and Northeast Ohio, Western New York, and Southwest Virginia market. Multifamily loans are expected to be repaid from the cash flows of the underlying property so the collective amount of rents must be sufficient to cover all operating expenses, property management and maintenance, taxes and debt service. Increases in vacancy rates, interest rates or other changes in general economic conditions can have an impact on the borrower and its ability to repay the loan.
Owner-occupied, nonfarm nonresidential properties: The Bank originates mortgage loans to operating companies primarily within Central and Northwest Pennsylvania, Central and Northeast Ohio, Western New York, and Southwest Virginia market. Owner-occupied real estate properties primarily include retail buildings, medical buildings and industrial/warehouse space. Owner-occupied loans are typically repaid first by the cash flows generated by the borrower’s business operations. The primary risk characteristics are specific to the underlying business and its ability to generate sustainable profitability and positive cash flow. Factors that may influence a borrower's ability to repay their loan include demand for the business’ products or services, the quality and depth of management, the degree of competition, regulatory changes, and general economic conditions.
Non-owner occupied, nonfarm nonresidential properties: The Bank originates mortgage loans for commercial real estate that is managed as an investment property primarily within Central and Northwest Pennsylvania, Central and Northeast Ohio, Western New York, and Southwest Virginia market. Commercial real estate properties primarily include retail buildings/shopping centers, hotels, office/medical buildings and industrial/warehouse space. Increases in vacancy rates, interest rates or other changes in general economic conditions can have an impact on the borrower and its ability to repay the loan. Commercial real estate loans are generally considered to have a higher degree of credit risk as they may be dependent on the ongoing success and operating viability of a fewer number of tenants who are occupying the property and who may have a greater degree of exposure to economic conditions.
Agricultural production and other loans to farmers: The Bank originates loans secured or unsecured to farm owners and operators (including tenants) or to nonfarmers for the purpose of financing agricultural production, including the growing and storing of crops, the marketing or carrying of agricultural products by the growers thereof, and the breeding, raising, fattening, or marketing of livestock, and for purchases of farm machinery, equipment, and implements. The primary risk characteristics are specific to the uncertainty on production, market, financial, environmental and human resources.
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Commercial and Industrial: The Bank originates lines of credit and term loans to operating companies for business purposes. The loans are generally secured by business assets such as accounts receivable, inventory, business vehicles and equipment as well as the stock of a company, if privately held. Commercial and Industrial loans are typically repaid first by the cash flows generated by the borrower’s business operations. The primary risk characteristics are specific to the underlying business and its ability to generate sustainable profitability and positive cash flow. Factors that may influence a borrower's ability to repay their loan include demand for the business’ products or services, the quality and depth of management, the degree of competition, regulatory changes, and general economic conditions. The ability of the Bank to foreclose and realize sufficient value from business assets securing these loans is often uncertain. To mitigate the risk characteristics of commercial and industrial loans, commercial real estate may be included as a secondary source of collateral. The Bank will often require more frequent reporting requirements from the borrower in order to better monitor its business performance.
Credit cards: The Bank originates credit cards offered to individuals and businesses for household, family, other personal and business expenditures. Credit cards generally are floating rate loans and include both unsecured and secured lines. Credit card loans generally do not have stated maturities and are unconditionally cancellable. The primary risk characteristics associated with credit cards typically involve major changes to the borrower, including unemployment or other loss of income, unexpected significant expenses, such as for major medical expenses, catastrophic events, divorce or death.
Other revolving credit plans: The Bank originates lines of credit to individuals for household, family, and other personal expenditures. Consumer loans generally have higher interest rates and shorter terms than residential loans but tend to have higher credit risk due to the type of collateral securing the loan or in some cases the absence of collateral. The primary risk characteristics associated with other revolving loans typically involve major changes to the borrower, including unemployment or other loss of income, unexpected significant expenses, such as for major medical expenses, catastrophic events, divorce or death.
Automobile: The Bank originates consumer loans extended for the purpose of purchasing new and used passenger cars and other vehicles such as minivans, vans, sport-utility vehicles, pickup trucks, and similar light trucks for personal use. The primary risk characteristics associated with automobile loans typically involve major changes to the borrower, including unemployment or other loss of income, unexpected significant expenses, such as for major medical expenses, catastrophic events, divorce or death.
Other consumer: The Bank originates loans to individuals for household, family, and other personal expenditures. This also represents all other loans that cannot be categorized in any of the previous mentioned consumer loan segments. Consumer loans generally have higher interest rates and shorter terms than residential loans but tend to have higher credit risk due to the type of collateral securing the loan or in some cases the absence of collateral. The primary risk characteristics associated with other consumer loans typically involve major changes to the borrower, including unemployment or other loss of income, unexpected significant expenses, such as for major medical expenses, catastrophic events, divorce or death.
Obligations (other than securities and leases) of states and political subdivisions: The Bank originates various types of loans made directly to municipalities. These loans are repaid through general cash flows or through specific revenue streams, such as water and sewer fees. The primary risk characteristics associated with municipal loans are the municipality's ability to manage cash flow, balance the fiscal budget, fixed asset and infrastructure requirements. Additional risks include changes in demographics, as well as social and political conditions.
Other loans: The Bank originates other loans, such as loans to nonprofit organizations, including churches, hospitals, educational and charitable institutions, clubs, and similar associations. The primary risk characteristics associated with these types of loans are repayment, demographic, social, political and reputation risks.
Overdrafts: The Bank reports overdrawn customer deposit balances as loans.
Methods utilized by management to estimate expected credit losses include a discounted cash flow ("DCF") model that discounts instrument-level contractual cash flows, adjusted for prepayments and curtailments, incorporating loss expectations, and a weighted average remaining maturity ("WARM") model which contemplates expected losses at a pool-level, utilizing historic loss information.
Under both models, management estimates the allowance for credit losses on loans using relevant available information, from internal and external sources, relating to past events, current conditions, and reasonable and supportable forecasts. After the end of the reasonable and supportable forecast period, the loss rates revert to the mean loss rate over a period of eight quarters.
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Historical credit loss experience, including examination of loss experience at representative peer institutions when the Corporation’s loss history does not result in estimations that are meaningful to users of the Corporation’s Consolidated Financial Statements, provides the basis for the estimation of expected credit losses. Adjustments to historical loss information are made for differences in current loan-specific risk characteristics such as differences in underwriting standards, changes in environmental conditions, delinquency level, segment growth rates and changes in duration within new markets, or other relevant factors.
The DCF model uses inputs of current and forecasted macroeconomic indicators to predict future loss rates. The current macroeconomic indicator utilized by the Corporation is the Federal unemployment rate and the S&P/Case-Shiller U.S. National Home Price Index for select collective residential related pools. In building the current expected credit loss methodology utilized in the DCF model, a correlation between this indicator and historic loss levels was developed, enabling a prediction of future loss rates related to future Federal unemployment rates and S&P/Case-Shiller U.S. National Home Price Index.
The portfolio segments utilizing the DCF methodology comprised 85.9% and 86.0% of the amortized cost of loans as of December 31, 2023 and December 31, 2022, respectively, and included:
•Farmland
•Home equity lines of credit
•Residential Mortgages secured by first liens
•Residential Mortgages secured by junior liens
•Multifamily (5 or more) residential properties
•Owner-occupied, nonfarm nonresidential properties
•Non-owner occupied, nonfarm nonresidential properties
•Agricultural production and other loans to farmers
•Commercial and Industrial
•Automobile
•Obligations (other than securities and leases) of states and political subdivisions
•Other loans
The WARM model uses combined historic loss rates for the Corporation and peer institutions, if necessary, gathered from call report filings. The selected period for which historic loss rates are used is dependent on management's evaluation of current conditions and expectations of future loss conditions.
The portfolio segments utilizing the WARM methodology comprised 14.1% and 14.0% of the amortized cost of loans as of December 31, 2023 and December 31, 2022, respectively, and included:
•1-4 Family Construction
•Other construction loans and all land development and other land loans
•Credit cards
•Other revolving credit plans
•Other consumer
Loans that do not share risk characteristics are evaluated on an individual basis. Loans evaluated individually are not also included in the collective evaluation and typically represent collateral dependent loans but may also include other nonperforming loans or borrowers experiencing financial difficulty. The Corporation uses the practical expedient to measure individually evaluated loans as collateral dependent and/or when repayment is expected to be provided substantially through the operation or sale of the collateral. Expected credit losses are based on the fair value at the reporting date, adjusted for selling costs as appropriate. For collateral dependent loans, credit loss is measured as the difference between the amortized cost basis in the loan and the fair value of the underlying collateral. The fair value of the collateral is adjusted for the estimated cost to sell if repayment or satisfaction of a loan is dependent on the sale (rather than only on the operation) of the collateral.
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Allowance for Credit Losses on Off-Balance Sheet Credit Exposures
Management estimates expected credit losses over the contractual period in which the Corporation is exposed to credit risk via a contractual obligation to extend credit, unless that obligation is unconditionally cancellable by the Corporation. The estimate includes consideration of the likelihood that funding will occur and an estimate of expected credit losses on commitments expected to be funded over its estimated life. Management estimates the amount of expected losses by calculating a commitment usage factor over the contractual period for exposures that are not unconditionally cancellable by the Bank and applying the loss factors used in the allowance for credit losses on loans methodology to the results of the usage calculation to estimate the liability for credit losses related to unfunded commitments for each loan segment. The estimate of credit losses on OBS credit exposures is $759 thousand and $603 thousand at December 31, 2023 and 2022, respectively, and was reported in accrued interest payable and other liabilities on the consolidated balance sheets .
Mortgage Servicing Rights
When mortgage loans are sold with servicing retained, servicing rights are initially recorded at fair value with the income statement effect recorded in mortgage banking income. Fair value is based on market prices for comparable mortgage servicing contracts, when available, or alternatively, is based on a valuation model that calculates the present value of estimated future net servicing income. The valuation model incorporates assumptions that market participants would use in estimating future net servicing income, such as the cost to service, the discount rate, the custodial earnings rate, an inflation rate, ancillary income, prepayment speeds and default rates and losses. The Corporation compares the valuation model inputs and results to published industry data in order to validate the model results and assumptions. All classes of servicing assets are subsequently measured using the amortization method which requires servicing rights to be amortized into non-interest income in proportion to, and over the period of, the estimated future net servicing income of the underlying loans.
Servicing rights are evaluated for impairment based upon the fair value of the rights as compared to carrying amount. Impairment is determined by stratifying rights into groupings based on predominant risk characteristics, such as interest rate, loan type and investor type. Impairment is recognized through a valuation allowance, to the extent that fair value is less than the carrying amount. If the Corporation later determines that all or a portion of the impairment no longer exists, a reduction of the allowance may be recorded as an increase to income. Changes in valuation allowances are reported with mortgage banking income on the income statement. The fair values of servicing rights are subject to significant fluctuations as a result of changes in estimated and actual prepayment speeds and default rates and losses.
Servicing fee income, which is reported on the income statement as mortgage banking income, is recorded for fees earned for servicing loans. The fees are based on a contractual percentage of the outstanding principal or a fixed amount per loan and are recorded as income when earned. The amortization of mortgage servicing rights is netted against loan servicing fee income. Late fees and ancillary fees related to loan servicing are not material.
Transfers of Financial Assets
Transfers of financial assets are accounted for as sales when control over the assets has been relinquished. Control over transferred assets is deemed to be surrendered when the assets have been isolated from the Corporation, the transferee obtains the right (free of conditions that constrain it from taking advantage of that right) to pledge or exchange the transferred assets, and the Corporation does not maintain effective control over the transferred assets.
Foreclosed Assets
Foreclosed assets are initially recorded at fair value less costs to sell when acquired, establishing a new cost basis. Physical possession of residential real estate property collateralizing a consumer mortgage loan occurs when legal title is obtained upon completion of foreclosure or when the borrower conveys all interest in the property to satisfy the loan through completion of a deed in lieu of foreclosure or through a similar legal agreement. These assets are subsequently accounted for at lower of cost or fair value less estimated costs to sell. If fair value declines subsequent to foreclosure, a valuation allowance is recorded through expense. Operating costs after acquisition are expensed.
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Premises and Equipment
Land is carried at cost. Premises and equipment are stated at cost less accumulated depreciation. Depreciation of premises and equipment is computed principally by the straight line method. In general, useful lives range from 3 to 39 years with lives for furniture, fixtures and equipment ranging from 3 to 10 years and lives of buildings and building improvements ranging from 15 to 39 years. Amortization of leasehold improvements is computed using the straight-line method over useful lives of the leasehold improvements or the term of the lease, whichever is shorter. Maintenance, repairs and minor renewals are charged to expense as incurred.
Leases
The Corporation leases real estate property for branches and certain equipment. The Corporation determines if an arrangement is a lease at inception and if the lease is an operating lease or a finance lease.
Operating lease right-of-use assets represent the Corporation's right to use an underlying asset during the lease term and operating lease liabilities represent the Corporation's obligation to make lease payments arising from the lease. The period over which the right-of-use asset is amortized is generally the lesser of the expected remaining term or the remaining useful life of the leased asset. The lease liability is decreased as periodic lease payments are made. The Corporation performs impairment assessments for right-of-use assets when events or changes in circumstances indicate that their carrying values may not be recoverable.
The calculated amounts of the right-of-use assets and lease liabilities are impacted by the length of the lease term and the discount rate used to calculate the present value of the minimum remaining lease payments. The Corporation's lease agreements often include one or more options to renew at the Corporation's discretion. If, at lease inception, the Corporation considers the exercising of a renewal option to be reasonably certain, the Corporation includes the extended term in the calculation of the right-of-use asset and lease liability. Generally, the Corporation cannot practically determine the interest rate implicit in the lease so the Corporation's incremental borrowing rate is used as the discount rate for the lease. The Corporation uses Federal Home Loan Bank ("FHLB") of Pittsburgh advance interest rates, which have been deemed as the Corporation's incremental borrowing rate, at lease inception based upon the term of the lease. The Corporation's lease agreements do not contain any material residual value guarantees or material restrictive covenants.
Lease expense, variable lease expense and short-term lease expense are included in occupancy expense in the Corporation's consolidated statements of income. For facility-related leases, the Corporation elected, by lease class, to not separate lease and non-lease components. Lease expense is recognized on a straight-line basis over the lease term. Variable lease expense primarily represents payments such as common area maintenance, real estate taxes, and utilities and are recognized as expense in the period when those payments are incurred. Short-term lease expense relates to leases with an initial term of 12 months or less. The Corporation has elected to not record a right-of-use asset or lease liability for short-term leases.
Federal Home Loan Bank Stock
As a member of the FHLB of Pittsburgh, the Corporation is required to purchase and hold stock in the FHLB to satisfy membership and borrowing requirements. This stock is restricted in that it can only be sold to the FHLB or to another member institution, and all sales of FHLB stock must be at par. As a result of these restrictions, FHLB stock is unlike other investment securities insofar as there is no trading market for FHLB stock and the transfer price is determined by FHLB membership rules and not by market participants.
FHLB stock is held as a long-term investment, is valued at its cost basis and is analyzed for impairment based on the ultimate recoverability of the par value. The Corporation evaluates impairment quarterly. The decision of whether impairment exists is a matter of judgment that reflects our view of the FHLB’s long-term performance, which includes factors such as the following:
•its operating performance;
•the severity and duration of declines in the fair value of its net assets related to its capital stock amount;
•its commitment to make payments required by law or regulation and the level of such payments in relation to its operating performance;
•the impact of legislative and regulatory changes on the FHLB, and accordingly, on the members of FHLB; and
•its liquidity and funding position.
Both cash and stock dividends are reported as income.
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Qualified Affordable Housing Project Investments
The Corporation has investments in various real estate limited partnerships that acquire, develop, own and operate low and moderate-income housing. These investments are made directly in Low Income Housing Tax Credit ("LIHTC") partnerships formed by third parties. As a limited partner in these operating partnerships, the Corporation receives tax credits and tax deductions for losses incurred by the underlying properties. The Corporation accounts for its ownership interest in LIHTC partnerships in accordance with Accounting Standards Update ("ASU") 2014-01, "Investments – Equity Method and Joint Ventures (Topic 323): Accounting for Investments in Qualified Affordable Housing Projects." The standard permits an entity to amortize the initial cost of the investment in proportion to the amount of the tax credits and other tax benefits received and recognize the net investment performance in the income statement as a component of income tax expense. There were no impairment losses during the year resulting from the forfeiture or ineligibility of tax credits related to qualified affordable housing project investments.
Bank Owned Life Insurance
The Corporation has purchased life insurance policies on certain key employees. Bank-owned life insurance is recorded at the amount that can be realized under the insurance contract at the balance sheet date, which is the cash surrender value adjusted for other charges or other amounts due that are probable at settlement.
Goodwill and Other Intangible Assets
Goodwill resulting from business combinations prior to January 1, 2009 represents the excess of the purchase price over the fair value of the net assets of businesses acquired. Goodwill resulting from business combinations after January 1, 2009 is generally determined as the excess of the fair value of the consideration transferred, plus the fair value of any noncontrolling interest in the acquiree, over the fair value of the net assets acquired and liabilities assumed as of the acquisition date. Goodwill and intangible assets acquired in a purchase business combination and determined to have an indefinite useful life are not amortized, but tested for impairment at least annually or more frequently if events and circumstances exists that indicate that a goodwill impairment test should be performed. The Corporation has no intangible assets with an indefinite useful life.
During the fourth quarter of 2023, the Corporation elected to change the timing of its annual goodwill impairment test from December 31 to November 30. The selection of November 30 as the annual testing date for the impairment of goodwill is intended to move the testing to a time period outside of the Corporation's annual financial reporting process to allow the Corporation additional time to complete the analysis. The Corporation believes that this change is preferable under the circumstances, and that this change does not accelerate, delay or avoid an impairment charge. The Corporation has also determined that a change in the annual testing date did not result in adjustments to the consolidated financial statements when applied retrospectively. Intangible assets with definite useful lives are amortized over their estimated useful lives to their estimated residual values. Goodwill is an intangible asset with an indefinite life on the Corporation’s balance sheet.
Other intangible assets consist of core deposit intangible assets arising from the acquisition of Bank of Akron in 2020 and naming rights associated with the formation of Ridge View Bank, a division of the Bank in 2023. The core deposit intangible assets from these acquisitions are amortized using an accelerated method over their estimated useful lives, which range from four years to ten years, respectively. The naming rights have an indefinite useful life.
Loan Commitments and Related Financial Instruments
Financial instruments include off-balance sheet credit instruments, such as commitments to make loans and commercial letters of credit, issued to meet customer financing needs. The face amount for these items represents the exposure to loss, before considering customer collateral or ability to repay. Such financial instruments are recorded when they are funded.
Derivatives
Derivative financial instruments are recognized as assets or liabilities at fair value. The Corporation has interest rate swap agreements which are used as part of its asset liability management to help manage interest rate risk. The Corporation does not use derivatives for trading purposes.
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At the inception of a derivative contract, the Corporation designates the derivative as one of three types based on the Corporation's intentions and belief as to likely effectiveness as a hedge. These three types are (1) a hedge of the fair value of a recognized asset or liability or of an unrecognized firm commitment ("fair value hedge"), (2) a hedge of a forecasted transaction or the variability of cash flows to be received or paid related to a recognized asset or liability ("cash flow hedge"), or (3) an instrument with no hedging designation ("stand-alone derivative"). For a fair value hedge, the gain or loss on the derivative, as well as the offsetting loss or gain on the hedged item attributable to the hedged risk, are recognized in current earnings as fair values change. For a cash flow hedge, the gain or loss on the derivative is reported in other comprehensive income (loss) and is reclassified into earnings in the same periods during which the hedged transaction affects earnings. Changes in the fair value of derivatives that do not qualify for hedge accounting are reported currently in earnings, as non-interest income.
Accrued settlements on derivatives that qualify for hedge accounting are recorded in interest income or interest expense, based on the item being hedged. Accrued settlements on derivatives not designated or that do not qualify for hedge accounting are reported in non-interest income. Cash flows on hedges are classified in the cash flow statement the same as the cash flows of the items being hedged.
The Corporation formally documents the relationship between derivatives and hedged items, as well as the risk-management objective and the strategy for undertaking hedge transactions, at the inception of the hedging relationship. This documentation includes linking fair value or cash flow hedges to specific assets and liabilities on the balance sheet or to specific firm commitments or forecasted transactions. The Corporation also formally assesses, both at the hedge’s inception and on an ongoing basis, whether the derivative instruments that are used are highly effective in offsetting changes in fair values or cash flows of the hedged items. The Corporation discontinues hedge accounting when it determines that the derivative is no longer effective in offsetting changes in the fair value or cash flows of the hedged item, the derivative is settled or terminates, a hedged forecasted transaction is no longer probable, a hedged firm commitment is no longer firm, or treatment of the derivative as a hedge is no longer appropriate or intended.
When hedge accounting is discontinued, subsequent changes in fair value of the derivative are recorded as non-interest income. When a fair value hedge is discontinued, the hedged asset or liability is no longer adjusted for changes in fair value and the existing basis adjustment is amortized or accreted over the remaining life of the asset or liability. When a cash flow hedge is discontinued but the hedged cash flows or forecasted transactions are still expected to occur, gains or losses that were accumulated in other comprehensive income are amortized into earnings over the same periods which the hedged transactions will affect earnings.
The Corporation is exposed to losses if a counterparty fails to make its payments under a contract in which the Corporation is in the net receiving position. The Corporation anticipates that the counterparties will be able to fully satisfy their obligations under the agreements. All the contracts to which the Corporation is a party settle monthly or quarterly. In addition, the Corporation obtains collateral above certain thresholds of the fair value of its hedges for each counterparty based upon their credit standing and the Corporation has netting agreements with the dealers with which it does business.
Stock-Based Compensation
Compensation cost is recognized for restricted stock awards issued to employees, based on the fair value of these awards at the date of grant. The market price of the Corporation’s common stock at the date of grant is used for restricted stock awards.
Compensation cost is recognized over the required service period, generally defined as the vesting period. For awards with graded vesting, compensation cost is recognized on a straight-line basis over the requisite service period for the entire award. Certain of the restricted stock awards are performance based and costs are recognized based upon certain performance conditions. The Corporation's accounting policy is to recognize forfeitures as they occur
Income Taxes
Income tax expense is the total of the current year income tax due or refundable and the change in deferred tax assets and liabilities. Deferred tax assets and liabilities are the expected future tax amounts for the temporary differences between carrying amounts and tax bases of assets and liabilities, computed using enacted tax rates. A valuation allowance, if needed, reduces deferred tax assets to the amount expected to be realized.
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A tax position is recognized as a benefit only if it is "more likely than not" that the tax position would be sustained in a tax examination, with a tax examination being presumed to occur. The amount recognized is the largest amount of tax benefit that is greater than 50% likely of being realized on examination. For tax positions not meeting the "more likely than not" test, no tax benefit is recorded.
The Corporation recognizes interest and/or penalties, if any, related to income tax matters in income tax expense.
Retirement Plans
Post retirement obligation expense is the net of service and interest cost, return on plan assets and amortization of gains and losses not immediately recognized. The Corporation’s expense associated with its 401(k) plan is determined under the provisions of the plan document and includes both matching and profit sharing components. Deferred compensation and supplemental retirement plan expenses allocate the benefits over years of service.
Earnings Per Common Share
Basic earnings per common share is computed by dividing net income available to common shareholders by the weighted average number of common shares outstanding during the applicable period, excluding outstanding participating securities. Diluted earnings per common share is computed using the weighted average number of common shares determined for the basic computation plus the dilutive effect of potential common shares issuable under certain stock compensation plans. Unvested share-based payment awards that contain nonforfeitable rights to dividends or dividend equivalents (whether paid or unpaid) are participating securities and are included in the computation of earnings per share pursuant to the two-class method. The Corporation has determined that its outstanding non-vested time-based restricted stock awards are participating securities.
Comprehensive Income
The Corporation presents comprehensive income as part of the Consolidated Statements of Income and Comprehensive Income. Other comprehensive income and loss consists of unrealized holding gains and losses on the AFS debt securities portfolio, amortization of AFS debt securities transferred to HTM, changes in the unrecognized actuarial gain and transition obligation related to the Corporation’s post retirement benefits plans, and changes in the fair value of the Corporation’s interest rate swaps, net of tax.
Loss Contingencies
Loss contingencies, including claims and legal actions arising in the ordinary course of business, are recorded as liabilities when the likelihood of loss is probable and an amount or range of loss can be reasonably estimated. Management does not believe there now are such matters that will have a material effect on the financial statements.
Treasury Stock
The purchase of the Corporation’s common stock is recorded at cost. Purchases of the stock are made in the open market based on market prices. At the date of subsequent reissue, the treasury stock account is reduced by the cost of such stock on a first-in-first-out basis.
Dividend Restriction
Banking regulations require maintaining certain capital levels and may limit the dividends paid by the bank to the holding company or by the holding company to shareholders.
Fair Value of Financial Instruments
Fair values of financial instruments are estimated using relevant market information and other assumptions, as more fully disclosed in a separate note. Fair value estimates involve uncertainties and matters of significant judgment regarding interest rates, credit risk, prepayments, and other factors, especially in the absence of broad markets for particular items. Changes in assumptions or in market conditions could significantly affect the estimates.
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Revenue Recognition
The Corporation recognizes revenues when earned based upon (i) contractual terms as transactions occur, or (ii) as related services are provided and collectability is reasonably assured. The largest source of revenue for the Corporation is interest income, which is primarily recognized on an accrual basis according to a written contract, such as loan and lease agreements or investment securities contracts. The Corporation earns non-interest income through a variety of financial and transactional services such as security gains, loan servicing, gains on the sale of loans, commitment fees, fees from financial guarantees, certain credit card fees, gains (losses) on sale of other real estate owned not financed by the Corporation, is not within the scope of ASU 2014-9.
The types of non-interest income within the scope of the standard that are material to the consolidated financial statements are services charges on deposit accounts, wealth and asset management fee income, card processing and interchange income, and other income and are discussed in greater detail below:
Service charges on deposit accounts: The Corporation earns fees from its deposit customers for transaction-based, account maintenance, and overdraft services. Transaction-based fees, which include services such as ATM use fees, stop payment charges, statement rendering, and ACH fees, are recognized at the time the transaction is executed, as that is the point in time the Corporation fulfills the customer’s request. Account maintenance fees, which relate primarily to monthly maintenance, are earned over the course of a month, representing the period over which the Corporation satisfies the performance obligation. Overdraft fees are recognized at the point in time that the overdraft occurs. Services charges on deposits are withdrawn from the customer’s account balance.
Wealth and asset management fees: The Corporation earns wealth and asset management fees from its contracts with trust and brokerage customers to manage assets for investment, and/or to transact on their accounts. These fees are primarily earned over time as the Corporation provides the contracted monthly or quarterly services and are generally assessed based on a tiered scale of the market value of assets under management at month end. Fees for these services are billed to customers on a monthly or quarterly basis and are recorded as revenue at the end of the period for which the wealth and asset management services have been performed. Other performance obligations, such as the delivery of account statements to customers, are generally considered immaterial to the overall transaction price.
Card processing and interchange income: The Corporation earns interchange fees from check card and credit card transactions conducted through the Visa payment network. Interchange fees from cardholder transactions represent a percentage of the underlying transaction value and are recognized daily, concurrently with the transaction processing services provided to the cardholder.
Other income: The Corporation's other income includes sources such as bank owned life insurance, changes in fair value and realized gains on sales of equity securities, certain service fees, gains (losses) on sales of fixed assets, and gains (losses) on sale of other real estate owned. The service fees are recognized in the same manner as the service charges mentioned above. While gains (losses) on the sale of other real estate owned are within the scope of ASU 2014-9 if financed by the Corporation, the Corporation does not finance the sale of transactions. The revenue on the sale is recorded upon the transfer of control of the property to the buyer and the other real estate owned asset is derecognized.
The Corporation does not exercise significant judgements in the recognition of income, as typically income is not recognized until the performance obligation has been satisfied. The Corporation has not recognized any assets from the costs to obtain or fulfill a contract with customers for revenue streams that fall within the guidance of Topic 606.
Adoption of New Accounting Standards
Accounting Standards Adopted in 2021
In August 2018, the FASB issued ASU 2018-14, "Disclosure Framework - Changes to the Disclosure Requirements for Defined Benefit Plans." ASU 2018-14 amends ASC 715-20, "Compensation - Retirement Benefits - Defined Benefit Plans - General." The amended guidance modifies the disclosure requirements for employers that sponsor defined benefit pension or other post-retirement plans by removing and adding certain disclosures for these plans. The eliminated disclosures include (a) the amounts in accumulated Other Comprehensive Income expected to be recognized in net periodic benefit costs over the next fiscal year, and (b) the effects of a one percentage point change in assumed health care cost trend rates on the net periodic benefit costs and the benefit obligation for post-retirement health care benefits. Additional disclosures include descriptions of significant gains
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and losses affecting the benefit obligation for the period. ASU 2018-14 was effective for the Corporation on January 1, 2021 and did not have a material impact on the Corporation's financial statements and related disclosures.
In December 2019, the FASB issued ASU 2019-12 "Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes." These amendments remove specific exceptions to the general principles in Topic 740 in GAAP. It eliminates the need for an organization to analyze whether the following apply in a given period: exception to the incremental approach for intraperiod tax allocation; exceptions to accounting for basis differences where there are ownership changes in foreign investments; and exception in interim period income tax accounting for year-to-date losses that exceed anticipated losses. It also improves financial statement preparers' application of income tax- related guidance and simplifies GAAP for: franchise taxes that are partially based on income; transactions with a government that result in a step up in the tax basis of goodwill; separate financial statements of legal entities that are not subject to tax; and enacts changes in tax laws in interim periods. The guidance is effective for public business entities for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2020. Early adoption is permitted. ASU 2019-12 was effective for the Corporation on January 1, 2021 and did not have a material impact on the Corporation's financial statements and related disclosures.
In January 2020, the FASB issued ASU 2020-01 - Investments - Equity Securities (Topic 321), Investments - Equity Method and Joint Ventures (Topic 323), and Derivatives and Hedging (Topic 815) - Clarifying the Interactions between Topic 321, Topic 323, and Topic 815. ASU 2020-01 represents changes to clarify certain interactions between the guidance to account for certain equity securities under Topic 321, the guidance to account for investments under the equity method of accounting in Topic 323, and the guidance in Topic 815. These amendments improve current U.S. GAAP by reducing diversity in practice and increasing comparability of the accounting for these transactions. ASU 2020-01 was effective for the Corporation on January 1, 2021 and did not have a material impact on the Corporation's financial statements and related disclosures.
In October 2020, the FASB issued ASU 2020-08 - Codification Improvements to Subtopic 310-20, Receivables - Nonrefundable Fees and Other Costs. ASU 2020-08 clarifies that an entity should reevaluate whether a callable debt security is within the scope of paragraph 310-20-35-33 for each reporting period. ASU 2020-08 was effective for the Corporation on January 1, 2021 and did not have a material impact on the Corporation's financial statements and related disclosures.
In January 2021, the FASB issued ASU 2021-01 - Reference Rate Reform (Topic 848). ASU 2021-01 expands and clarifies the scope of ASU 2020-04 to include derivatives affected by changes in interest rates used for margining, discounting, or contract price alignment, commonly referred to as the "discounting transaction." Derivatives impacted by the discounting transaction will be eligible for certain optional expedients and exceptions related to contract modifications and hedge accounting as defined in Topic 848. The amendments in this update are effective for all entities as of March 12, 2020, and based upon the amendments provided in ASU 2022-06 discussed below, can generally be applied through December 31, 2024. The adoption of ASU 2021-01 did not significantly impact the Corporation's financial statements and related disclosures.
In August 2021, FASB issued ASU 2021-06 - Presentation of Financial Statements (Topic 205), Financial Services—Depository and Lending (Topic 942), and Financial Services—Investment Companies (Topic 946). ASU 2021-06 updates the codification to align with SEC Final Rule Releases No. 33-10786 and No. 33-10835. Specific to financial institutions, these SEC releases updated required annual statistical disclosures. The amendments in ASU 2021-06 were effective immediately. The updates to the statistical disclosures are reflected in the Corporation's Annual Report on Form 10-K for the fiscal year ending December 31, 2021, to align with this guidance.
Accounting Standards Adopted in 2022
In December 2022, FASB issued ASU 2022-06 - Reference Rate Reform (Topic 848). ASU 2022-06 extends the period of time preparers can utilize the reference rate reform relief guidance provided by ASU 2020-04 and ASU 2021-01, which are discussed above. ASU 2022-06, which was effective upon issuance, defers the sunset date of this prior guidance from December 31, 2022 to December 31, 2024, after which entities will no longer be permitted to apply the relief guidance in Topic 848. ASU 2022-06 did not have a material impact on the Corporation's financial statements and related disclosures.
Accounting Standards Adopted in 2023
In October 2021, the FASB issued ASU 2021-08, "Business Combinations (Topic 805), Accounting for Contract Assets and Contract Liabilities from Contracts with Customers." This ASU requires that an acquirer recognize and measure contract assets and contract liabilities acquired in a business combination in accordance with Topic 606, "Revenue from Contracts with Customers." ASU 2021-08 was effective for the Corporation on January 1, 2023 and did not have a material impact on its consolidated financial statements and related disclosures.
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In March 2022, the FASB issued ASU 2022-01, "Derivatives and Hedging (Topic 815): Fair Value Hedging - Portfolio Layer Method." Under prior guidance, entities can apply the last-of-layer hedging method to hedge the exposure of a closed portfolio of prepayable financial assets to fair value changes due to changes in interest rates for a portion of the portfolio that is not expected to be affected by prepayments, defaults, and other events affecting the timing and amount of cash flows. ASU 2022-01 expands the last-of-layer method, which permits only one hedge layer, to allow multiple hedged layers of a single closed portfolio. To reflect that expansion, the last-of-layer method is renamed the portfolio layer method. ASU 2022-01 also (i) expands the scope of the portfolio layer method to include non-prepayable financial assets, (ii) specifies eligible hedging instruments in a single-layer hedge, (iii) provides additional guidance on the accounting for and disclosure of hedge basis adjustments under the portfolio layer method and (iv) specifies how hedge basis adjustments should be considered when determining credit losses for the assets included in the closed portfolio. ASU 2022-01 was effective for the Corporation on January 1, 2023 and did not have a material impact on its consolidated financial statements and related disclosures.
In March 2022, the FASB issued ASU 2022-02, "Financial Instruments – Credit Losses (Topic 326): Troubled Debt Restructurings and Vintage Disclosures." This ASU eliminates the separate recognition and measurement guidance for Troubled Debt Restructurings ("TDRs") by creditors. The elimination of the TDRs guidance may be adopted prospectively for loan modifications after adoption or on a modified retrospective basis, which would also apply to loans previously modified, resulting in a cumulative effect adjustment to retained earnings in the period of adoption for changes in the allowance for credit losses. ASU 2022-02 was effective for the Corporation on January 1, 2023 and did not have a material impact on its consolidated financial statements and related disclosures.
In July 2023, FASB issued ASU 2023-03, "Presentation of Financial Statements (Topic 205), Income Statement - Reporting Comprehensive Income (Topic 220), Distinguishing Liabilities from Equity (Topic 480), Equity (Topic 505), and Compensation - Stock Compensation (Topic 718): Amendments to SEC Paragraphs Pursuant to SEC Staff Accounting Bulletin No. 120, SEC Staff Announcement at the March 24, 2022 Emerging Issues Task Force ("EITF") Meeting, and Staff Accounting Bulletin Topic 6.B, Accounting Series Release 280 - General Revision of Regulation S-X: Income or Loss Applicable to Common Stock." This ASU amends the FASB Accounting Standards Codification for SEC updates pursuant to SEC Staff Accounting Bulletin No. 120; SEC Staff Announcement at the March 24, 2022 EITF Meeting; and Staff Accounting Bulletin Topic 6.B, Accounting Series Release 280 - General Revision of Regulation S-X: Income or Loss Applicable to Common Stock. The updates were effective immediately. These updates did not have a material impact on the Corporation's consolidated financial statements and related disclosures.
Effects of Newly Issued But Not Yet Effective Accounting Standards
In June 2022, FASB issued ASU 2022-03, "Fair Value Measurement (Topic 820): Fair Value Measurement of Equity Securities Subject to Contractual Sale Restrictions." In this ASU, a contractual restriction on the sale of an equity security is not considered in measuring the security's fair value. The ASU also requires certain disclosures for equity securities that are subject to contractual restrictions. This guidance is effective for the Corporation on January 1, 2024, with early adoption permitted. The Corporation is evaluating the effect that ASU 2022-03 will have on its consolidated financial statements and related disclosures.
In March 2023, FASB issued ASU 2023-01, "Leases (Topic 842): Common Control Arrangements." This ASU requires the Corporation to amortize leasehold improvements associated with common control leases over the useful life to the common control group. This guidance is effective for the Corporation on January 1, 2024 with early adoption permitted. The Corporation is evaluating the effect that ASU 2023-01 will have on its consolidated financial statements and related disclosures.
In March 2023, FASB issued ASU 2023-02, "Investments—Equity Method and Joint Ventures (Topic 323): Accounting for Investments in Tax Credit Structures Using the Proportional Amortization Method." In this ASU, these amendments allow the Corporation to elect to account for qualifying tax equity investments using the proportional amortization method, regardless of the program giving rise to the related income tax credits. This guidance is effective for the Corporation on January 1, 2024 with early adoption permitted. The Corporation is evaluating the effect that ASU 2023-02 will have on its consolidated financial statements and related disclosures.
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In August 2023, FASB issued ASU 2023-05, "Business Combinations - Joint Venture Formations (Subtopic 805-60): Recognition and Initial Measurement." ASU 2023-05 requires certain joint ventures to apply a new basis of accounting upon formation by recognizing and initially measuring most of their assets and liabilities at fair value. The objectives of the amendments are to provide decision-useful information to investors and other allocators of capital in a joint venture’s financial statements and also to reduce diversity in practice. ASU 2023-05 should be applied prospectively and is effective for all newly formed joint venture entities with a formation date on or after January 1, 2025. Early adoption is permitted, and joint ventures formed prior to the adoption date may elect to apply the new guidance retrospectively back to their original formation date. The Corporation is evaluating the effect that ASU 2023-05 will have on its consolidated financial statements and related disclosures.
In October 2023, FASB issued ASU 2023-06, "Disclosure Improvements: Codification Amendments in Response to the SEC’s Disclosure Update and Simplification Initiative." The ASU amends the ASC to incorporate certain disclosure requirements from SEC Release No. 33-10532 - Disclosure Update and Simplification that was issued in 2018. The effective date for each amendment will be the date on which the SEC’s removal of that related disclosure from Regulation S-X or Regulation S-K becomes effective, with early adoption prohibited. The Corporation is evaluating the effect that ASU 2023-06 will have on its consolidated financial statements and related disclosures.
In November 2023, FASB issued ASU 2023-07, "Improvements to Reportable Segment Disclosures (Topic 280)." This ASU updates reportable segment disclosure requirements by requiring disclosures of significant reportable segment expenses that are regularly provided to the CODM and included within each reported measure of a segment's profit or loss. This ASU also requires disclosure of the title and position of the individual identified as the CODM and an explanation of how the CODM uses the reported measures of a segment’s profit or loss in assessing segment performance and deciding how to allocate resources. The ASU is effective for annual periods beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024. Adoption of the ASU should be applied retrospectively to all prior periods presented in the financial statements. Early adoption is also permitted. The Corporation is evaluating the effect that ASU 2023-07 will have on its consolidated financial statements and related disclosures.
In December 2023, the FASB issued ASU 2023-09, "Improvements to Income Tax Disclosures (Topic 740)." The ASU requires disaggregated information about a reporting entity’s effective tax rate reconciliation as well as additional information on income taxes paid. The ASU is effective on a prospective basis for annual periods beginning after December 15, 2024. Early adoption is also permitted for annual financial statements that have not yet been issued or made available for issuance. The Corporation is evaluating the effect that ASU 2023-09 will have on its consolidated financial statements and related disclosures.
2. Securities
AFS debt securities at December 31, 2023 and 2022 were as follows:

| December 31, 2023
| Amortized |  | Gross Unrealized |  | Allowance For |  | Fair
| Cost |  | Gains |  | Losses |  | Credit Losses |  | Value
U.S. Gov’t sponsored entities | $ | 5,024 |  |  | $ | — |  |  | $ | (36) |  |  | $ | — |  |  | $ | 4,988 |
State & political subdivisions | 105,102 |  |  | 22 |  |  | (13,315) |  |  | — |  |  | 91,809 |
Residential & multi-family mortgage | 225,871 |  |  | 1 |  |  | (34,353) |  |  | — |  |  | 191,519 |
Corporate notes & bonds | 48,459 |  |  | 13 |  |  | (5,333) |  |  | — |  |  | 43,139 |
Pooled SBA | 11,347 |  |  | — |  |  | (847) |  |  | — |  |  | 10,500 |
Total | $ | 395,803 |  |  | $ | 36 |  |  | $ | (53,884) |  |  | $ | — |  |  | $ | 341,955 |

| December 31, 2022
| Amortized |  | Gross Unrealized |  | Allowance For |  | Fair
| Cost |  | Gains |  | Losses |  | Credit Losses |  | Value
U.S. Gov’t sponsored entities | $ | 3,213 |  |  | $ | — |  |  | $ | (84) |  |  | $ | — |  |  | $ | 3,129 |
State & political subdivisions | 112,734 |  |  | 24 |  |  | (17,095) |  |  | — |  |  | 95,663 |
Residential & multi-family mortgage | 256,111 |  |  | — |  |  | (38,564) |  |  | — |  |  | 217,547 |
Corporate notes & bonds | 47,111 |  |  | — |  |  | (4,720) |  |  | — |  |  | 42,391 |
Pooled SBA | 13,823 |  |  | — |  |  | (1,144) |  |  | — |  |  | 12,679 |
Total | $ | 432,992 |  |  | $ | 24 |  |  | $ | (61,607) |  |  | $ | — |  |  | $ | 371,409 |

HTM debt securities at December 31, 2023 and 2022 are as follows:
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| December 31, 2023
| Amortized |  | Gross Unrealized |  | Allowance For |  | Fair
| Cost |  | Gains |  | Losses |  | Credit Losses |  | Value
U.S. Gov’t sponsored entities | $ | 302,945 |  |  | $ | — |  |  | $ | (19,038) |  |  | $ | — |  |  | $ | 283,907 |
Residential & multi-family mortgage | 86,023 |  |  | — |  |  | (9,360) |  |  | — |  |  | 76,663 |
Total | $ | 388,968 |  |  | $ | — |  |  | $ | (28,398) |  |  | $ | — |  |  | $ | 360,570 |

| December 31, 2022
| Amortized |  | Gross Unrealized |  | Allowance For |  | Fair
| Cost |  | Gains |  | Losses |  | Credit Losses |  | Value
U.S. Gov’t sponsored entities | $ | 307,711 |  |  | $ | — |  |  | $ | (27,276) |  |  | $ | — |  |  | $ | 280,435 |
Residential & multi-family mortgage | 97,054 |  |  | — |  |  | (10,101) |  |  | — |  |  | 86,953 |
Total | $ | 404,765 |  |  | $ | — |  |  | $ | (37,377) |  |  | $ | — |  |  | $ | 367,388 |

The Corporation elected to transfer 74 AFS debt securities with an aggregate fair value of $213.7 million to a classification of HTM during the year ended December 31, 2022. In accordance with FASB ASC 320-10-55-24, the transfer from AFS to HTM must be recorded at the fair value of the AFS debt securities at the time of transfer. The net unrealized holding loss of $5.6 million, net of tax, at the date of transfer was retained in accumulated other comprehensive income (loss), with the associated pre-tax amount retained in the carrying value of the HTM debt securities. Such amounts will be amortized to comprehensive income over the remaining life of the securities.
Information pertaining to security sales is as follows:

Year ended December 31 | Proceeds |  | Gross Gains |  | Gross Losses
2023 | $ | 13,151 |  |  | $ | 52 |  |  | $ | — |
2022 | 22,164 |  |  | 651 |  |  | — |
2021 | 33,553 |  |  | 783 |  |  | — |

The tax provision related to these net realized gains at December 31, 2023, 2022 and 2021 were $11 thousand, $137 thousand, and $164 thousand, respectively.
The following is a schedule of the contractual maturity of AFS and HTM debt securities, excluding equity securities, at December 31, 2023:

| Available-for-sale |  | Held-to-maturity
| Amortized Cost |  | Fair Value |  | Amortized Cost |  | Fair Value
1 year or less | $ | 13,023 |  |  | $ | 12,902 |  |  | $ | 68,745 |  |  | $ | 67,413 |
1 year – 5 years | 40,995 |  |  | 38,750 |  |  | 188,794 |  |  | 177,158 |
5 years – 10 years | 83,131 |  |  | 72,006 |  |  | 45,406 |  |  | 39,336 |
After 10 years | 21,436 |  |  | 16,278 |  |  | — |  |  | — |
| 158,585 |  |  | 139,936 |  |  | 302,945 |  |  | 283,907 |
Residential and multi-family mortgage | 225,871 |  |  | 191,519 |  |  | 86,023 |  |  | 76,663 |
Pooled SBA | 11,347 |  |  | 10,500 |  |  | — |  |  | — |
Total debt securities | $ | 395,803 |  |  | $ | 341,955 |  |  | $ | 388,968 |  |  | $ | 360,570 |

Mortgage securities and pooled SBA securities are not due at a single date; periodic payments are received based on the payment patterns of the underlying collateral.
On December 31, 2023 and 2022, securities carried at $489.0 million and $561.8 million, respectively, were pledged to secure public deposits and for other purposes as provided by law.
At December 31, 2023 and 2022, there were no holdings of securities by any one issuer, other than U.S. Government sponsored entities, in an amount greater than 10% of shareholders’ equity.
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AFS debt securities with unrealized losses at December 31, 2023 and 2022, aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position, were as follows:

December 31, 2023 | Less than 12 Months |  | 12 Months or More |  | Total
Description of Securities | Fair Value |  | Unrealized Loss |  | Fair Value |  | Unrealized Loss |  | Fair Value |  | Unrealized Loss
U.S. Gov’t sponsored entities | $ | 2,487 |  |  | $ | (1) |  |  | $ | 1,956 |  |  | $ | (35) |  |  | $ | 4,443 |  |  | $ | (36) |
State & political subdivisions | 749 |  |  | — |  |  | 84,828 |  |  | (13,315) |  |  | 85,577 |  |  | (13,315) |
Residential & multi-family mortgage | — |  |  | — |  |  | 191,436 |  |  | (34,353) |  |  | 191,436 |  |  | (34,353) |
Corporate notes & bonds | 978 |  |  | (22) |  |  | 41,488 |  |  | (5,311) |  |  | 42,466 |  |  | (5,333) |
Pooled SBA | — |  |  | — |  |  | 10,409 |  |  | (847) |  |  | 10,409 |  |  | (847) |
Total | $ | 4,214 |  |  | $ | (23) |  |  | $ | 330,117 |  |  | $ | (53,861) |  |  | $ | 334,331 |  |  | $ | (53,884) |

December 31, 2022 | Less than 12 Months |  | 12 Months or More |  | Total
Description of Securities | Fair Value |  | Unrealized Loss |  | Fair Value |  | Unrealized Loss |  | Fair Value |  | Unrealized Loss
U.S. Gov’t sponsored entities | $ | 3,129 |  |  | $ | (84) |  |  | $ | — |  |  | $ | — |  |  | $ | 3,129 |  |  | $ | (84) |
State & political subdivisions | 34,667 |  |  | (1,887) |  |  | 54,546 |  |  | (15,208) |  |  | 89,213 |  |  | (17,095) |
Residential and multi-family mortgage | 48,996 |  |  | (3,122) |  |  | 168,551 |  |  | (35,442) |  |  | 217,547 |  |  | (38,564) |
Corporate notes & bonds | 31,730 |  |  | (3,403) |  |  | 10,661 |  |  | (1,317) |  |  | 42,391 |  |  | (4,720) |
Pooled SBA | 5,107 |  |  | (314) |  |  | 7,572 |  |  | (830) |  |  | 12,679 |  |  | (1,144) |
Total | $ | 123,629 |  |  | $ | (8,810) |  |  | $ | 241,330 |  |  | $ | (52,797) |  |  | $ | 364,959 |  |  | $ | (61,607) |

HTM debt securities with unrealized losses at December 31, 2023 and 2022, aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position, were as follows:

December 31, 2023 | Less than 12 Months |  | 12 Months or More |  | Total
Description of Securities | Fair Value |  | Unrealized Loss |  | Fair Value |  | Unrealized Loss |  | Fair Value |  | Unrealized Loss
U.S. Gov’t sponsored entities | $ | — |  |  | $ | — |  |  | $ | 283,907 |  |  | $ | (19,038) |  |  | $ | 283,907 |  |  | $ | (19,038) |
Residential & multi-family mortgage | — |  |  | — |  |  | 76,663 |  |  | (9,360) |  |  | 76,663 |  |  | (9,360) |
Total | $ | — |  |  | $ | — |  |  | $ | 360,570 |  |  | $ | (28,398) |  |  | $ | 360,570 |  |  | $ | (28,398) |

December 31, 2022 | Less than 12 Months |  | 12 Months or More |  | Total
Description of Securities | Fair Value |  | Unrealized Loss |  | Fair Value |  | Unrealized Loss |  | Fair Value |  | Unrealized Loss
U.S. Gov’t sponsored entities | $ | 143,556 |  |  | $ | (10,063) |  |  | $ | 136,879 |  |  | $ | (17,213) |  |  | $ | 280,435 |  |  | $ | (27,276) |
State & political subdivisions | 24,132 |  |  | (2,253) |  |  | 62,821 |  |  | (7,848) |  |  | 86,953 |  |  | (10,101) |
Total | $ | 167,688 |  |  | $ | (12,316) |  |  | $ | 199,700 |  |  | $ | (25,061) |  |  | $ | 367,388 |  |  | $ | (37,377) |

The Corporation evaluates securities for possible credit allowance on a quarterly basis, or more frequently when economic or market conditions warrant such an evaluation.
As of December 31, 2023 and 2022, management performed an assessment for allowance for credit losses on the Corporation’s AFS debt securities in an unrealized loss position and as of December 31, 2023 management performed an assessment for allowance for credit losses on the Corporation's HTM debt securities.
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First an assessment was performed to determine if the Corporation intends to sell, or it is more likely than not that it will be required to sell the security before recovery of its amortized cost. Management determined it does not intend to sell and will not be required to sell any of the securities before recovery of its amortized cost. Next, management performed an evaluation relying on information obtained from various sources, including publicly available financial data, ratings by external agencies, brokers and other sources. For the securities that comprise corporate notes and bonds and the securities that are issued by state and political subdivisions, management monitors publicly available financial information, such as filings with the Securities and Exchange Commission, in order to evaluate the securities credit quality and ability to repay its debt obligations. For financial institution issuers, management monitors information from quarterly "call" report filings that are used to generate Uniform Bank Performance Reports. All other securities that were in an unrealized loss position at the balance sheet date were reviewed by management, and issuer-specific documents were reviewed as appropriate given the following considerations; the financial condition and near-term prospects of the issuer and whether downgrades by bond rating agencies have occurred. Based on the results of the assessment, management believes the decline in fair value is not the result of credit losses. As a result no credit allowance is required as of December 31, 2023.
As of December 31, 2023 and 2022 management concluded that the securities described in the previous paragraph did not decline in fair value due to credit factors for the following reasons:
•There is no indication of any significant deterioration of the creditworthiness of the institutions that issued the securities.
•All contractual interest payments on the securities have been received as scheduled, and no information has come to management’s attention through the processes previously described which would lead to a conclusion that future contractual payments will not be timely received.
In addition, the rise in interest rates is the primary driver of the decline in fair value below amortized cost as of December 31, 2023.
Equity securities at December 31, 2023 and 2022 were as follows:

| December 31, 2023 |  | December 31, 2022
Corporate equity securities | $ | 5,341 |  |  | $ | 6,973 |
Mutual funds | 2,223 |  |  | 1,406 |
Money market | 1,103 |  |  | 479 |
Corporate notes | 634 |  |  | 757 |
Total | $ | 9,301 |  |  | $ | 9,615 |

During the year ended December 31, 2023, 2022, and 2021, the proceeds from sold equity securities were $296 thousand in December 31, 2023, zero in December 31, 2022 and zero in December 31, 2021, resulting in net realized gains of $22 thousand in December 31, 2023, zero in December 31, 2022, and zero in December 31, 2021.
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3. Loans Receivable and Allowance for Credit Losses
Total net loans receivable at December 31, 2023 and 2022 are summarized as follows:

| 2023 |  | Percentage of Total |  | 2022 |  | Percentage of Total
Farmland | $ | 31,869 |  |  | 0.7 | % |  | $ | 32,168 |  |  | 0.8 | %
Owner-occupied, nonfarm nonresidential properties | 493,064 |  |  | 11.0 |  |  | 468,493 |  |  | 11.0 |
Agricultural production and other loans to farmers | 1,652 |  |  | — |  |  | 1,198 |  |  | — |
Commercial and Industrial 1 | 726,442 |  |  | 16.3 |  |  | 791,911 |  |  | 18.5 |
Obligations (other than securities and leases) of states and political subdivisions | 152,201 |  |  | 3.4 |  |  | 145,345 |  |  | 3.4 |
Other loans | 25,507 |  |  | 0.6 |  |  | 24,710 |  |  | 0.6 |
Other construction loans and all land development and other land loans | 491,539 |  |  | 11.0 |  |  | 446,685 |  |  | 10.5 |
Multifamily (5 or more) residential properties | 254,342 |  |  | 5.7 |  |  | 257,696 |  |  | 6.0 |
Non-owner occupied, nonfarm nonresidential properties | 896,043 |  |  | 20.1 |  |  | 795,315 |  |  | 18.6 |
1-4 Family Construction | 51,207 |  |  | 1.1 |  |  | 51,171 |  |  | 1.2 |
Home equity lines of credit | 130,700 |  |  | 2.9 |  |  | 124,892 |  |  | 2.9 |
Residential Mortgages secured by first liens | 990,986 |  |  | 22.2 |  |  | 942,531 |  |  | 22.0 |
Residential Mortgages secured by junior liens | 91,063 |  |  | 2.0 |  |  | 74,638 |  |  | 1.7 |
Other revolving credit plans | 42,877 |  |  | 1.0 |  |  | 36,372 |  |  | 0.9 |
Automobile | 25,315 |  |  | 0.6 |  |  | 21,806 |  |  | 0.5 |
Other consumer | 51,592 |  |  | 1.1 |  |  | 49,144 |  |  | 1.1 |
Credit cards | 11,785 |  |  | 0.3 |  |  | 10,825 |  |  | 0.3 |
Overdrafts | 292 |  |  | — |  |  | 278 |  |  | — |
Total loans | $ | 4,468,476 |  |  | 100.0 | % |  | $ | 4,275,178 |  |  | 100.0 | %
Less: Allowance for credit losses | (45,832) |  |  |  |  | (43,436) |  |  |
Loans, net | $ | 4,422,644 |  |  |  |  | $ | 4,231,742 |  |  |
Net deferred loan origination fees (costs) included in the above loan table | $ | 2,448 |  |  |  |  | $ | 4,463 |  |  |
1 PPP loans, net of deferred PPP processing fees, both those disbursed in 2020 and those disbursed in 2021, are included in the Commercial and Industrial classification.

The Corporation’s outstanding loans receivable and related unfunded commitments are primarily concentrated within Central and Northwest Pennsylvania, Central and Northeast Ohio, Western New York and Southwest Virginia. The Bank attempts to limit concentrations within specific industries by utilizing dollar limitations to single industries or customers, and by entering into participation agreements with third parties. Collateral requirements are established based on management’s assessment of the customer. The Corporation maintains lending policies to control the quality of the loan portfolio. These policies delegate the authority to extend loans under specific guidelines and underwriting standards. These policies are prepared by the Corporation’s management and reviewed and approved annually by the Corporation’s Board of Directors.
Syndicated loans, net of deferred fees and costs, are included in the commercial and industrial classification and totaled $108.7 million and $156.6 million as of December 31, 2023 and 2022, respectively.
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Transactions in the allowance for credit losses for the year ended December 31, 2023 were as follows:

| Beginning Allowance |  | (Charge-offs) |  | Recoveries |  | Provision (Benefit) for Credit Losses on Loans Receivable(1) |  | Ending Allowance
Farmland | $ | 159 |  |  | $ | — |  |  | $ | — |  |  | $ | (33) |  |  | $ | 126 |
Owner-occupied, nonfarm nonresidential properties | 2,905 |  |  | (26) |  |  | 29 |  |  | 1,041 |  |  | 3,949 |
Agricultural production and other loans to farmers | 6 |  |  | — |  |  | — |  |  | 1 |  |  | 7 |
Commercial and Industrial | 9,766 |  |  | (392) |  |  | 438 |  |  | (379) |  |  | 9,433 |
Obligations (other than securities and leases) of states and political subdivisions | 1,863 |  |  | — |  |  | — |  |  | 750 |  |  | 2,613 |
Other loans | 456 |  |  | — |  |  | — |  |  | (69) |  |  | 387 |
Other construction loans and all land development and other land loans | 3,253 |  |  | — |  |  | — |  |  | 780 |  |  | 4,033 |
Multifamily (5 or more) residential properties | 2,353 |  |  | (65) |  |  | 6 |  |  | (1,264) |  |  | 1,030 |
Non-owner occupied, nonfarm nonresidential properties | 7,653 |  |  | (694) |  |  | 10 |  |  | 2,201 |  |  | 9,170 |
1-4 Family Construction | 327 |  |  | — |  |  | — |  |  | 29 |  |  | 356 |
Home equity lines of credit | 1,173 |  |  | (10) |  |  | 5 |  |  | (337) |  |  | 831 |
Residential Mortgages secured by first liens | 8,484 |  |  | (117) |  |  | 3 |  |  | (320) |  |  | 8,050 |
Residential Mortgages secured by junior liens | 1,035 |  |  | — |  |  | — |  |  | 441 |  |  | 1,476 |
Other revolving credit plans | 722 |  |  | (119) |  |  | 30 |  |  | 340 |  |  | 973 |
Automobile | 271 |  |  | (56) |  |  | 1 |  |  | 142 |  |  | 358 |
Other consumer | 2,665 |  |  | (1,982) |  |  | 134 |  |  | 1,836 |  |  | 2,653 |
Credit cards | 67 |  |  | (189) |  |  | 18 |  |  | 199 |  |  | 95 |
Overdrafts | 278 |  |  | (604) |  |  | 139 |  |  | 479 |  |  | 292 |
Total loans | $ | 43,436 |  |  | $ | (4,254) |  |  | $ | 813 |  |  | $ | 5,837 |  |  | $ | 45,832 |

(1) Excludes provision for credit losses related to unfunded commitments. Note 18, "Off-Balance Sheet Commitments and Contingencies," in the consolidated financial statements provides more detail concerning the provision for credit losses related to unfunded commitments of the Corporation.
The Corporation's allowance for credit losses is influenced by loan volumes, risk rating migration, delinquency status and other conditions influencing loss expectations, such as reasonable and supportable forecasts of economic conditions.
Transactions in the allowance for credit losses for the year ended December 31, 2022 were as follows:

| Beginning Allowance |  | (Charge-offs) |  | Recoveries |  | Provision (Benefit) for Credit Losses on Loans Receivable(1) |  | Ending Allowance
Farmland | $ | 151 |  |  | $ | — |  |  | $ | — |  |  | $ | 8 |  |  | $ | 159 |
Owner-occupied, nonfarm nonresidential properties | 3,339 |  |  | (21) |  |  | 15 |  |  | (428) |  |  | 2,905 |
Agricultural production and other loans to farmers | 9 |  |  | — |  |  | — |  |  | (3) |  |  | 6 |
Commercial and Industrial | 8,837 |  |  | (175) |  |  | 139 |  |  | 965 |  |  | 9,766 |
Obligations (other than securities and leases) of states and political subdivisions | 1,649 |  |  | — |  |  | — |  |  | 214 |  |  | 1,863 |
Other loans | 149 |  |  | — |  |  | — |  |  | 307 |  |  | 456 |
Other construction loans and all land development and other land loans | 2,198 |  |  | — |  |  | — |  |  | 1,055 |  |  | 3,253 |
Multifamily (5 or more) residential properties | 2,289 |  |  | — |  |  | — |  |  | 64 |  |  | 2,353 |
Non-owner occupied, nonfarm nonresidential properties | 6,481 |  |  | (335) |  |  | 336 |  |  | 1,171 |  |  | 7,653 |
1-4 Family Construction | 158 |  |  | — |  |  | — |  |  | 169 |  |  | 327 |
Home equity lines of credit | 1,169 |  |  | — |  |  | 12 |  |  | (8) |  |  | 1,173 |
Residential Mortgages secured by first liens | 6,943 |  |  | (51) |  |  | 28 |  |  | 1,564 |  |  | 8,484 |
Residential Mortgages secured by junior liens | 546 |  |  | — |  |  | — |  |  | 489 |  |  | 1,035 |
Other revolving credit plans | 528 |  |  | (92) |  |  | 50 |  |  | 236 |  |  | 722 |
Automobile | 263 |  |  | (28) |  |  | 2 |  |  | 34 |  |  | 271 |
Other consumer | 2,546 |  |  | (1,623) |  |  | 89 |  |  | 1,653 |  |  | 2,665 |
Credit cards | 92 |  |  | (99) |  |  | 38 |  |  | 36 |  |  | 67 |
Overdrafts | 241 |  |  | (561) |  |  | 138 |  |  | 460 |  |  | 278 |
Total loans | $ | 37,588 |  |  | $ | (2,985) |  |  | $ | 847 |  |  | $ | 7,986 |  |  | $ | 43,436 |

(1) Excludes provision for credit losses related to unfunded commitments. Note 18, "Off-Balance Sheet Commitments and Contingencies," in the consolidated financial statements provides more detail concerning the provision for credit losses related to unfunded commitments of the Corporation.
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Transactions in the allowance for credit losses for the year ended December 31, 2021 were as follows:

| Beginning Allowance |  | (Charge-offs) |  | Recoveries |  | Provision (Benefit) for Credit Losses on Loans Receivable(1) |  | Ending Allowance
Farmland | $ | 221 |  |  | $ | — |  |  | $ | — |  |  | $ | (70) |  |  | $ | 151 |
Owner-occupied, nonfarm nonresidential properties | 3,700 |  |  | (584) |  |  | 10 |  |  | 213 |  |  | 3,339 |
Agricultural production and other loans to farmers | 24 |  |  | — |  |  | — |  |  | (15) |  |  | 9 |
Commercial and Industrial | 6,233 |  |  | (163) |  |  | 203 |  |  | 2,564 |  |  | 8,837 |
Obligations (other than securities and leases) of states and political subdivisions | 998 |  |  | (407) |  |  | 30 |  |  | 1,028 |  |  | 1,649 |
Other loans | 68 |  |  | — |  |  | — |  |  | 81 |  |  | 149 |
Other construction loans and all land development and other land loans | 1,956 |  |  | (282) |  |  | — |  |  | 524 |  |  | 2,198 |
Multifamily (5 or more) residential properties | 2,724 |  |  | — |  |  | — |  |  | (435) |  |  | 2,289 |
Non-owner occupied, nonfarm nonresidential properties | 8,658 |  |  | (49) |  |  | — |  |  | (2,128) |  |  | 6,481 |
1-4 Family Construction | 82 |  |  | — |  |  | — |  |  | 76 |  |  | 158 |
Home equity lines of credit | 985 |  |  | (7) |  |  | 5 |  |  | 186 |  |  | 1,169 |
Residential Mortgages secured by first liens | 4,539 |  |  | (79) |  |  | 47 |  |  | 2,436 |  |  | 6,943 |
Residential Mortgages secured by junior liens | 241 |  |  | (3) |  |  | — |  |  | 308 |  |  | 546 |
Other revolving credit plans | 507 |  |  | (41) |  |  | 13 |  |  | 49 |  |  | 528 |
Automobile | 132 |  |  | (26) |  |  | 3 |  |  | 154 |  |  | 263 |
Other consumer | 2,962 |  |  | (1,193) |  |  | 140 |  |  | 637 |  |  | 2,546 |
Credit cards | 66 |  |  | (112) |  |  | 18 |  |  | 120 |  |  | 92 |
Overdrafts | 244 |  |  | (438) |  |  | 160 |  |  | 275 |  |  | 241 |
Total loans | $ | 34,340 |  |  | $ | (3,384) |  |  | $ | 629 |  |  | $ | 6,003 |  |  | $ | 37,588 |

(1) Excludes provision for credit losses related to unfunded commitments. Note 18, "Off-Balance Sheet Commitments and Contingencies," in the consolidated financial statements provides more detail concerning the provision for credit losses related to unfunded commitments of the Corporation.
For the year ended December 31, 2023, the allowance for credit losses increased primarily due to the growth in the Corporation's loan portfolio, including growth in new market areas. This was partially offset by improvements in the Corporation's historical loss rates, as well as the impact of net charge-offs. The year-over-year increase in reserves experienced in 2022 was primarily due to loan growth, the impact of net charge-offs, and the provision for credit losses recorded in 2022. There is still a significant amount of uncertainty related to the domestic and global economy, tightening credit conditions, persistent inflation, and higher interest rates. Management will continue to proactively evaluate its estimate of expected credit losses as new information becomes available.
Provision for credit losses was $6.0 million for the year ended December 31, 2023, compared to $8.6 million and $6.0 million for the years ended December 31, 2022 and 2021, respectively. Included in the provision for credit losses for the year ended December 31, 2023 was $156 thousand related to the allowance for unfunded commitments compared to $603 thousand and zero provision towards the allowance for unfunded commitments for the years ended December 31, 2022 and 2021, respectively.
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The following tables present the amortized cost basis of loans on nonaccrual status and loans past due over 89 days still accruing as of December 31, 2023 and 2022, respectively:

| December 31, 2023
| Nonaccrual |  | Nonaccrual With No Allowance for Credit Loss |  | Loans Past Due over 89 Days Still Accruing
Farmland | $ | 1,083 |  |  | $ | 1,083 |  |  | $ | — |
Owner-occupied, nonfarm nonresidential properties | 2,673 |  |  | 1,488 |  |  | — |
Commercial and Industrial | 7,512 |  |  | 4,389 |  |  | — |
Other construction loans and all land development and other land loans | 1,653 |  |  | 104 |  |  | — |
Multifamily (5 or more) residential properties | 305 |  |  | 305 |  |  | — |
Non-owner occupied, nonfarm nonresidential properties | 9,076 |  |  | 6,716 |  |  | — |
Home equity lines of credit | 940 |  |  | 940 |  |  | — |
Residential Mortgages secured by first liens | 5,316 |  |  | 4,902 |  |  | 23 |
Residential Mortgages secured by junior liens | 123 |  |  | 123 |  |  | — |
Other revolving credit plans | 81 |  |  | 81 |  |  | — |
Automobile | 79 |  |  | 79 |  |  | — |
Other consumer | 798 |  |  | 798 |  |  | — |
Credit cards | — |  |  | — |  |  | 32 |
Total loans | $ | 29,639 |  |  | $ | 21,008 |  |  | $ | 55 |

| December 31, 2022
| Nonaccrual |  | Nonaccrual With No Allowance for Credit Loss |  | Loans Past Due over 89 Days Still Accruing
Farmland | $ | 1,011 |  |  | $ | 1,011 |  |  | $ | 994 |
Owner-occupied, nonfarm nonresidential properties | 2,055 |  |  | 1,987 |  |  | — |
Commercial and Industrial | 5,485 |  |  | 2,366 |  |  | 71 |
Other construction loans and all land development and other land loans | 567 |  |  | 567 |  |  | — |
Multifamily (5 or more) residential properties | 1,066 |  |  | 423 |  |  | — |
Non-owner occupied, nonfarm nonresidential properties | 5,081 |  |  | 2,665 |  |  | — |
Home equity lines of credit | 475 |  |  | 475 |  |  | — |
Residential Mortgages secured by first liens | 4,329 |  |  | 3,882 |  |  | 48 |
Residential Mortgages secured by junior liens | 91 |  |  | 91 |  |  | — |
Other revolving credit plans | 26 |  |  | 26 |  |  | — |
Automobile | 19 |  |  | 19 |  |  | — |
Other consumer | 781 |  |  | 781 |  |  | — |
Credit cards | — |  |  | — |  |  | 8 |
Total loans | $ | 20,986 |  |  | $ | 14,293 |  |  | $ | 1,121 |

All payments received while on nonaccrual status are applied against the principal balance of the loan. The Corporation does not recognize interest income while loans are on nonaccrual status.
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The following tables present the amortized cost basis of loans receivable that are individually evaluated and collateral-dependent by class of loans as of December 31, 2023 and 2022, respectively:

| December 31, 2023
| Real Estate Collateral |  | Non-Real Estate Collateral
Farmland | $ | 736 |  |  | $ | — |
Owner-occupied, nonfarm nonresidential properties | 6,890 |  |  | 4 |
Commercial and Industrial | 5,489 |  |  | 4,291 |
Other construction loans and all land development and other land loans | 1,549 |  |  | — |
Multifamily (5 or more) residential properties | 305 |  |  | — |
Non-owner occupied, nonfarm nonresidential properties | 8,291 |  |  | — |
Home equity lines of credit | 308 |  |  | — |
Residential Mortgages secured by first liens | 1,070 |  |  | — |
Total loans | $ | 24,638 |  |  | $ | 4,295 |

| December 31, 2022
| Real Estate Collateral |  | Non-Real Estate Collateral
Farmland | $ | 829 |  |  | $ | — |
Owner-occupied, nonfarm nonresidential properties | 1,296 |  |  | 4 |
Commercial and Industrial | — |  |  | 1,904 |
Other construction loans and all land development and other land loans | 501 |  |  | — |
Multifamily (5 or more) residential properties | 1,066 |  |  | — |
Non-owner occupied, nonfarm nonresidential properties | 5,874 |  |  | — |
Home equity lines of credit | 335 |  |  | — |
Residential Mortgages secured by first liens | 1,150 |  |  | — |
Total loans | $ | 11,051 |  |  | $ | 1,908 |

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The following table presents the aging of the amortized cost basis in past-due loans as of December 31, 2023 by class of loans:

| 30 - 59 Days Past Due |  | 60 - 89 Days Past Due |  | Greater Than 89 Days Past Due |  | Total Past Due |  | Loans Not Past Due |  | Total
Farmland | $ | — |  |  | $ | 182 |  |  | $ | 129 |  |  | $ | 311 |  |  | $ | 31,558 |  |  | $ | 31,869 |
Owner-occupied, nonfarm nonresidential properties | 120 |  |  | — |  |  | 1,390 |  |  | 1,510 |  |  | 491,554 |  |  | 493,064 |
Agricultural production and other loans to farmers | — |  |  | — |  |  | — |  |  | — |  |  | 1,652 |  |  | 1,652 |
Commercial and Industrial | 64 |  |  | 379 |  |  | 314 |  |  | 757 |  |  | 725,685 |  |  | 726,442 |
Obligations (other than securities and leases) of states and political subdivisions | — |  |  | — |  |  | — |  |  | — |  |  | 152,201 |  |  | 152,201 |
Other loans | — |  |  | — |  |  | — |  |  | — |  |  | 25,507 |  |  | 25,507 |
Other construction loans and all land development and other land loans | — |  |  | 41 |  |  | 1,612 |  |  | 1,653 |  |  | 489,886 |  |  | 491,539 |
Multifamily (5 or more) residential properties | — |  |  | — |  |  | 305 |  |  | 305 |  |  | 254,037 |  |  | 254,342 |
Non-owner occupied, nonfarm nonresidential properties | 95 |  |  | 299 |  |  | 2,031 |  |  | 2,425 |  |  | 893,618 |  |  | 896,043 |
1-4 Family Construction | — |  |  | — |  |  | — |  |  | — |  |  | 51,207 |  |  | 51,207 |
Home equity lines of credit | 582 |  |  | 682 |  |  | 339 |  |  | 1,603 |  |  | 129,097 |  |  | 130,700 |
Residential Mortgages secured by first liens | 2,360 |  |  | 1,094 |  |  | 1,651 |  |  | 5,105 |  |  | 985,881 |  |  | 990,986 |
Residential Mortgages secured by junior liens | 21 |  |  | 38 |  |  | 60 |  |  | 119 |  |  | 90,944 |  |  | 91,063 |
Other revolving credit plans | 114 |  |  | 41 |  |  | 14 |  |  | 169 |  |  | 42,708 |  |  | 42,877 |
Automobile | 62 |  |  | 5 |  |  | 67 |  |  | 134 |  |  | 25,181 |  |  | 25,315 |
Other consumer | 452 |  |  | 453 |  |  | 354 |  |  | 1,259 |  |  | 50,333 |  |  | 51,592 |
Credit cards | 110 |  |  | 17 |  |  | 32 |  |  | 159 |  |  | 11,626 |  |  | 11,785 |
Overdrafts | — |  |  | — |  |  | — |  |  | — |  |  | 292 |  |  | 292 |
Total loans | $ | 3,980 |  |  | $ | 3,231 |  |  | $ | 8,298 |  |  | $ | 15,509 |  |  | $ | 4,452,967 |  |  | $ | 4,468,476 |

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The following table presents the aging of the amortized cost basis in past-due loans as of December 31, 2022 by class of loans.

| 30 - 59 Days Past Due |  | 60 - 89 Days Past Due |  | Greater Than 89 Days Past Due |  | Total Past Due |  | Loans Not Past Due |  | Total
Farmland | $ | — |  |  | $ | — |  |  | $ | 1,136 |  |  | $ | 1,136 |  |  | $ | 31,032 |  |  | $ | 32,168 |
Owner-occupied, nonfarm nonresidential properties | 185 |  |  | 27 |  |  | 734 |  |  | 946 |  |  | 467,547 |  |  | 468,493 |
Agricultural production and other loans to farmers | — |  |  | — |  |  | — |  |  | — |  |  | 1,198 |  |  | 1,198 |
Commercial and Industrial | 246 |  |  | 93 |  |  | 611 |  |  | 950 |  |  | 790,961 |  |  | 791,911 |
Obligations (other than securities and leases) of states and political subdivisions | — |  |  | — |  |  | — |  |  | — |  |  | 145,345 |  |  | 145,345 |
Other loans | — |  |  | — |  |  | — |  |  | — |  |  | 24,710 |  |  | 24,710 |
Other construction loans and all land development and other land loans | 1,522 |  |  | — |  |  | 501 |  |  | 2,023 |  |  | 444,662 |  |  | 446,685 |
Multifamily (5 or more) residential properties | 706 |  |  | — |  |  | 90 |  |  | 796 |  |  | 256,900 |  |  | 257,696 |
Non-owner occupied, nonfarm nonresidential properties | 113 |  |  | 60 |  |  | 879 |  |  | 1,052 |  |  | 794,263 |  |  | 795,315 |
1-4 Family Construction | — |  |  | — |  |  | — |  |  | — |  |  | 51,171 |  |  | 51,171 |
Home equity lines of credit | 203 |  |  | 10 |  |  | 49 |  |  | 262 |  |  | 124,630 |  |  | 124,892 |
Residential Mortgages secured by first liens | 1,302 |  |  | 538 |  |  | 1,775 |  |  | 3,615 |  |  | 938,916 |  |  | 942,531 |
Residential Mortgages secured by junior liens | 5 |  |  | — |  |  | 51 |  |  | 56 |  |  | 74,582 |  |  | 74,638 |
Other revolving credit plans | 65 |  |  | 27 |  |  | — |  |  | 92 |  |  | 36,280 |  |  | 36,372 |
Automobile | 36 |  |  | — |  |  | — |  |  | 36 |  |  | 21,770 |  |  | 21,806 |
Other consumer | 361 |  |  | 188 |  |  | 473 |  |  | 1,022 |  |  | 48,122 |  |  | 49,144 |
Credit cards | 196 |  |  | 18 |  |  | 8 |  |  | 222 |  |  | 10,603 |  |  | 10,825 |
Overdrafts | — |  |  | — |  |  | — |  |  | — |  |  | 278 |  |  | 278 |
Total loans | $ | 4,940 |  |  | $ | 961 |  |  | $ | 6,307 |  |  | $ | 12,208 |  |  | $ | 4,262,970 |  |  | $ | 4,275,178 |

Loan Modifications
The Corporation adopted ASU 2022-02, Financial Instruments - Credit Losses (Topic 326) Troubled Debt Restructurings and Vintage Disclosures effective January 1, 2023. The amendments in ASU 2022-02 eliminated the recognition and measure of troubled debt restructurings and enhanced disclosures for loan modifications to borrowers experiencing financial difficulty.
Occasionally, the Corporation modifies loans to borrowers in financial distress by providing principal forgiveness, term extension, an other-than-insignificant payment delay or interest rate reduction. When principal forgiveness is provided, the amount of forgiveness is charged-off against the allowance for credit losses.
In some cases, the Corporation provides multiple types of concessions on one loan. Typically, one type of concession, such as a term extension, is granted initially. If the borrower continues to experience financial difficulty, another concession, such as principal forgiveness, may be granted. For the loans included in the “combination” columns below, multiple types of modifications have been made on the same loan within the current reporting period. The combination is at least two of the following: a term extension, principal forgiveness, an other-than-insignificant payment delay and/or an interest rate reduction.
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The following table presents the amortized cost basis of loans at December 31, 2023 that were both experiencing financial difficulty and modified during the year ended December 31, 2023, by class and by type of modification. The percentage of the amortized cost basis of loans that were modified to borrowers in financial distress as compared to the amortized cost basis of each class of financing receivable is also presented below:

| Principal Forgiveness |  | Payment Delay |  | Term Extension |  | Interest Rate Reduction |  | Combination Payment Delay and Term Extension |  | Total Class of Financing Receivable |  |
Owner-occupied, nonfarm nonresidential properties | $ | — |  |  | $ | 5,934 |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | 1.2 | % |  |
Commercial and Industrial | — |  |  | 7,794 |  |  | 524 |  |  | 320 |  |  | — |  |  | 1.2 |  |  |
Non-owner occupied, nonfarm nonresidential properties | — |  |  | 5,911 |  |  | — |  |  | — |  |  | 785 |  |  | 0.7 |  |  |
Residential Mortgages secured by first liens | — |  |  | — |  |  | 414 |  |  | — |  |  | — |  |  | — |  |  |
Residential Mortgages secured by junior liens | — |  |  | — |  |  | 29 |  |  | — |  |  | — |  |  | — |  |  |
Total | $ | — |  |  | $ | 19,639 |  |  | $ | 967 |  |  | $ | 320 |  |  | $ | 785 |  |  | 0.5 | % |  |

The Corporation has zero in unfunded available credit to customers whose loan receivables are included in the previous table.
The Corporation closely monitors the performance of loans that are modified to borrowers experiencing financial difficulty to understand the effectiveness of its modification efforts.
The following table presents the performance of such loans that have been modified during the year ended December 31, 2023:

| Current |  | 30 - 59 Days Past Due |  | 60 - 89 Days Past Due |  | Greater Than 89 Days Past Due |  | Total Past Due
Owner-occupied, nonfarm nonresidential properties | $ | 5,934 |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | — |
Commercial and Industrial | 8,638 |  |  | — |  |  | — |  |  | — |  |  | — |
Non-owner occupied, nonfarm nonresidential properties | 6,696 |  |  | — |  |  | — |  |  | — |  |  | — |
Residential Mortgages secured by first liens | 414 |  |  | — |  |  | — |  |  | — |  |  | — |
Residential Mortgages secured by junior liens | 29 |  |  | — |  |  | — |  |  | — |  |  | — |
Total | $ | 21,711 |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | — |

The following table presents the financial effect of the loan modifications presented above to borrowers experiencing financial difficulty for the year ended December 31, 2023:

| Principal Forgiveness |  | Weighted Average Term Extension (in years) |  | Weighted Average Interest Rate Reduction
Commercial and Industrial | $ | — |  |  | 1.00 |  | 0.5 | %
Non-owner occupied, nonfarm nonresidential properties | — |  |  | 0.75 |  | — |
Residential Mortgages secured by first liens | — |  |  | 0.50 |  | — |
Residential Mortgages secured by junior liens | — |  |  | 0.50 |  | — |
Total | $ | — |  |  | 0.76 |  | 0.5 | %

The following table presents the amortized cost basis of loans that had a payment default during the year ended December 31, 2023 and were modified in the twelve months prior to that default to borrowers experiencing financial difficulty:

| Principal Forgiveness |  | Payment Delay |  | Term Extension |  | Interest Rate Reduction |  | Combination Payment Delay and Term Extension |  |  |  |
Other construction loans and all land development and other land loans | $ | — |  |  | $ | 1,549 |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  |  |  |
Non-owner occupied, nonfarm nonresidential properties | — |  |  | — |  |  | 1,523 |  |  | — |  |  | — |  |  |  |  |
Total | $ | — |  |  | $ | 1,549 |  |  | $ | 1,523 |  |  | $ | — |  |  | $ | — |  |  |  |  |

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If the Corporation determines that a modified loan (or portion of a loan) has subsequently been deemed uncollectible, the loan (or a portion of the loan) is written off and the amortized cost basis of the loan is reduced by the uncollectible amount and the allowance for credit losses is adjusted by the same amount.
Troubled Debt Restructurings Prior to the Adoption of ASU 2022-02
In order to determine whether a borrower is experiencing financial difficulty, an evaluation is performed of the probability that the borrower will be in payment default on any of its debt in the foreseeable future without a loan modification. This evaluation is performed using the Corporation’s internal underwriting policies. The Corporation has no further loan commitments to customers whose loan receivables are classified as a TDR.
As of December 31, 2022, the terms of certain loans were modified as TDRs. The modification of the terms of such loans included either or both of the following: a reduction of the stated interest rate of the loan; or an extension of the maturity date at a stated rate of interest lower than the current market rate for new debt with similar risk. The Corporation had an amortized cost in TDRs of $12.4 million and $16.6 million as of December 31, 2022 and 2021, respectively. The Corporation has allocated $2.2 million and $2.6 million of allowance for those loans as of December 31, 2022 and 2021, respectively.
The following tables presents loans by class modified as troubled debt restructurings that occurred during the years ended December 31, 2022, and 2021:

| Year Ended December 31, 2022
| Number of Loans |  | Pre-Modification Outstanding Recorded Investment |  | Post-Modification Outstanding Recorded Investment |  | Type of Modification
Commercial and Industrial | 1 |  |  | $ | 96 |  |  | $ | 96 |  |  | Extend Amortization
Non-owner occupied, nonfarm nonresidential properties | 1 |  |  | 1,784 |  |  | 1,784 |  |  | Modify Rate and Extend Amortization
Total loans | 2 |  |  | $ | 1,880 |  |  | $ | 1,880 |  |  |

| Year Ended December 31, 2021
| Number of Loans |  | Pre-Modification Outstanding Recorded Investment |  | Post-Modification Outstanding Recorded Investment |  | Type of Modification
Commercial and Industrial | 2 |  |  | 3,336 |  |  | 3,336 |  |  | Modify Payment
Multifamily (5 or more) residential properties | 1 |  |  | 717 |  |  | 717 |  |  | Modify Payment
Non-owner occupied, nonfarm nonresidential properties | 1 |  |  | 1,604 |  |  | 1,604 |  |  | Modify Payment
Total loans | 4 |  |  | $ | 5,657 |  |  | $ | 5,657 |  |  |

The TDRs described above increased the allowance for credit losses by immaterial amounts for the years ended December 31, 2022, and 2021, respectively.
A loan receivable is considered to be in payment default once it is 90 days contractually past due under the modified terms. There were no loans receivable modified as TDRs for which there was a payment default within twelve months following the modification during the years ended December 31, 2022 and 2021, respectively, and no principal balances were forgiven in connection with the loan receivable restructurings.
As discussed above, effective for January 1, 2023, the Corporation adopted prospectively Accounting Standard Update 2022-02, which eliminated the separate recognition and measurement guidance for TDRs by creditors.
Credit Quality Indicators
The Corporation categorizes loans receivable into risk categories based on relevant information about the ability of borrowers to service their debt such as: current financial information, historical payment experience, credit documentation, public information, and current economic trends, among other factors. The Corporation analyzes loans individually to classify the loans as to credit risk.
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The Corporation uses the following definitions for risk ratings:
Special Mention: A loan classified as special mention has a potential weakness that deserves management’s close attention. If left uncorrected, these potential weaknesses may result in deterioration of the repayment prospects for the loan or of the Corporation’s credit position at some future date.
Substandard: A loan classified as substandard is inadequately protected by the current net worth and paying capacity of the obligor or of the collateral pledged, if any. The loan has a well-defined weakness or weaknesses that jeopardize the liquidation of the debt. A substandard loan is characterized by the distinct possibility that the Corporation will sustain some loss if the deficiencies are not corrected.
Doubtful: A loan classified as doubtful has all the weaknesses inherent in those classified as substandard, with the added characteristic that the weaknesses make collection or liquidation in full, on the basis of currently existing facts, conditions, and values, highly questionable and improbable.
The following tables represent the Corporation's commercial credit risk profile by risk rating as of December 31, 2023 and 2022, respectively. Loans receivable not rated as special mention, substandard, or doubtful are considered to be pass rated loans.

| December 31, 2023
|  |  | Non-Pass Rated |  |  |  |
| Pass |  | Special Mention |  | Substandard |  | Doubtful |  | Total Non-Pass |  | Total
Farmland | $ | 30,786 |  |  | $ | — |  |  | $ | 1,083 |  |  | $ | — |  |  | $ | 1,083 |  |  | $ | 31,869 |
Owner-occupied, nonfarm nonresidential properties | 461,554 |  |  | 20,177 |  |  | 11,333 |  |  | — |  |  | 31,510 |  |  | 493,064 |
Agricultural production and other loans to farmers | 1,652 |  |  | — |  |  | — |  |  | — |  |  | — |  |  | 1,652 |
Commercial and Industrial | 653,981 |  |  | 52,030 |  |  | 20,431 |  |  | — |  |  | 72,461 |  |  | 726,442 |
Obligations (other than securities and leases) of states and political subdivisions | 139,014 |  |  | 13,187 |  |  | — |  |  | — |  |  | 13,187 |  |  | 152,201 |
Other loans | 25,507 |  |  | — |  |  | — |  |  | — |  |  | — |  |  | 25,507 |
Other construction loans and all land development and other land loans | 484,620 |  |  | 5,307 |  |  | 1,612 |  |  | — |  |  | 6,919 |  |  | 491,539 |
Multifamily (5 or more) residential properties | 252,199 |  |  | 1,346 |  |  | 797 |  |  | — |  |  | 2,143 |  |  | 254,342 |
Non-owner occupied, nonfarm nonresidential properties | 869,264 |  |  | 3,008 |  |  | 23,771 |  |  | — |  |  | 26,779 |  |  | 896,043 |
Total loans | $ | 2,918,577 |  |  | $ | 95,055 |  |  | $ | 59,027 |  |  | $ | — |  |  | $ | 154,082 |  |  | $ | 3,072,659 |

| December 31, 2022
|  |  | Non-Pass Rated |  |  |  |
| Pass |  | Special Mention |  | Substandard |  | Doubtful |  | Total Non-Pass |  | Total
Farmland | $ | 29,706 |  |  | $ | 1,450 |  |  | $ | 1,012 |  |  | $ | — |  |  | $ | 2,462 |  |  | $ | 32,168 |
Owner-occupied, nonfarm nonresidential properties | 433,467 |  |  | 27,796 |  |  | 7,230 |  |  | — |  |  | 35,026 |  |  | 468,493 |
Agricultural production and other loans to farmers | 1,198 |  |  | — |  |  | — |  |  | — |  |  | — |  |  | 1,198 |
Commercial and Industrial | 765,821 |  |  | 14,740 |  |  | 10,037 |  |  | 1,313 |  |  | 26,090 |  |  | 791,911 |
Obligations (other than securities and leases) of states and political subdivisions | 145,345 |  |  | — |  |  | — |  |  | — |  |  | — |  |  | 145,345 |
Other loans | 24,710 |  |  | — |  |  | — |  |  | — |  |  | — |  |  | 24,710 |
Other construction loans and all land development and other land loans | 443,300 |  |  | 1,296 |  |  | 2,089 |  |  | — |  |  | 3,385 |  |  | 446,685 |
Multifamily (5 or more) residential properties | 256,120 |  |  | 510 |  |  | 1,066 |  |  | — |  |  | 1,576 |  |  | 257,696 |
Non-owner occupied, nonfarm nonresidential properties | 772,450 |  |  | 2,791 |  |  | 20,074 |  |  | — |  |  | 22,865 |  |  | 795,315 |
Total loans | $ | 2,872,117 |  |  | $ | 48,583 |  |  | $ | 41,508 |  |  | $ | 1,313 |  |  | $ | 91,404 |  |  | $ | 2,963,521 |

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The following tables detail the amortized cost of loans receivable, by year of origination (for term loans) and by risk grade within each portfolio segment as of December 31, 2023. Current period originations may include modifications.

| Term Loans Amortized Cost Basis by Origination Year |  |  |  |  |  |
| 2023 |  | 2022 |  | 2021 |  | 2020 |  | 2019 |  | Prior |  | Revolving Loans Amortized Cost Basis |  | Revolving Loans Converted to Term |  | Total
Farmland |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Risk rating |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Pass | $ | 3,153 |  |  | $ | 11,393 |  |  | $ | 6,845 |  |  | $ | 1,465 |  |  | $ | 815 |  |  | $ | 6,813 |  |  | $ | 302 |  |  | $ | — |  |  | $ | 30,786 |
Special mention | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |
Substandard | — |  |  | — |  |  | 306 |  |  | — |  |  | — |  |  | 777 |  |  | — |  |  | — |  |  | 1,083 |
Total | $ | 3,153 |  |  | $ | 11,393 |  |  | $ | 7,151 |  |  | $ | 1,465 |  |  | $ | 815 |  |  | $ | 7,590 |  |  | $ | 302 |  |  | $ | — |  |  | $ | 31,869 |
Current period gross write offs | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | — |
Owner-occupied, nonfarm nonresidential properties |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Risk rating |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Pass | $ | 62,529 |  |  | $ | 121,722 |  |  | $ | 103,698 |  |  | $ | 44,286 |  |  | $ | 45,749 |  |  | $ | 73,649 |  |  | $ | 9,921 |  |  | $ | — |  |  | $ | 461,554 |
Special mention | 320 |  |  | 1,304 |  |  | 1,180 |  |  | 13,623 |  |  | 407 |  |  | 210 |  |  | 3,133 |  |  | — |  |  | 20,177 |
Substandard | 848 |  |  | — |  |  | 696 |  |  | 292 |  |  | 6,738 |  |  | 2,593 |  |  | 166 |  |  | — |  |  | 11,333 |
Total | $ | 63,697 |  |  | $ | 123,026 |  |  | $ | 105,574 |  |  | $ | 58,201 |  |  | $ | 52,894 |  |  | $ | 76,452 |  |  | $ | 13,220 |  |  | $ | — |  |  | $ | 493,064 |
Current period gross write offs | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | 26 |  |  | $ | — |  |  | $ | — |  |  | $ | 26 |
Agricultural production and other loans to farmers |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Risk rating |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Pass | $ | 703 |  |  | $ | 34 |  |  | $ | 89 |  |  | $ | 60 |  |  | $ | 5 |  |  | $ | 159 |  |  | $ | 602 |  |  | $ | — |  |  | $ | 1,652 |
Special mention | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |
Substandard | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |
Total | $ | 703 |  |  | $ | 34 |  |  | $ | 89 |  |  | $ | 60 |  |  | $ | 5 |  |  | $ | 159 |  |  | $ | 602 |  |  | $ | — |  |  | $ | 1,652 |
Current period gross write offs | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | — |
Commercial and Industrial |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Risk rating |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Pass | $ | 78,325 |  |  | $ | 140,178 |  |  | $ | 141,439 |  |  | $ | 33,475 |  |  | $ | 6,662 |  |  | $ | 14,709 |  |  | $ | 239,193 |  |  | $ | — |  |  | $ | 653,981 |
Special mention | 7,718 |  |  | 7,803 |  |  | 2,795 |  |  | 65 |  |  | 139 |  |  | 21 |  |  | 33,489 |  |  | — |  |  | 52,030 |
Substandard | — |  |  | 385 |  |  | 4,281 |  |  | 396 |  |  | 3,476 |  |  | 1,655 |  |  | 10,238 |  |  | — |  |  | 20,431 |
Total | $ | 86,043 |  |  | $ | 148,366 |  |  | $ | 148,515 |  |  | $ | 33,936 |  |  | $ | 10,277 |  |  | $ | 16,385 |  |  | $ | 282,920 |  |  | $ | — |  |  | $ | 726,442 |
Current period gross write offs | $ | 50 |  |  | $ | — |  |  | $ | — |  |  | $ | 191 |  |  | $ | — |  |  | $ | — |  |  | $ | 151 |  |  | $ | — |  |  | $ | 392 |
Obligations (other than securities and leases) of states and political subdivisions |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Risk rating |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Pass | $ | 24,964 |  |  | $ | 16,791 |  |  | $ | 31,768 |  |  | $ | 12,399 |  |  | $ | 4,190 |  |  | $ | 45,331 |  |  | $ | 3,571 |  |  | $ | — |  |  | $ | 139,014 |
Special mention | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | 13,187 |  |  | — |  |  | — |  |  | 13,187 |
Substandard | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |
Total | $ | 24,964 |  |  | $ | 16,791 |  |  | $ | 31,768 |  |  | $ | 12,399 |  |  | $ | 4,190 |  |  | $ | 58,518 |  |  | $ | 3,571 |  |  | $ | — |  |  | $ | 152,201 |
Current period gross write offs | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | — |
Other loans |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Risk rating |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Pass | $ | 3,649 |  |  | $ | 12,211 |  |  | $ | 5,289 |  |  | $ | 1,809 |  |  | $ | 288 |  |  | $ | — |  |  | $ | 2,261 |  |  | $ | — |  |  | $ | 25,507 |
Special mention | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |
Substandard | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |
Total | $ | 3,649 |  |  | $ | 12,211 |  |  | $ | 5,289 |  |  | $ | 1,809 |  |  | $ | 288 |  |  | $ | — |  |  | $ | 2,261 |  |  | $ | — |  |  | $ | 25,507 |
Current period gross write offs | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | — |

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| Term Loans Amortized Cost Basis by Origination Year |  |  |  |  |  |
| 2023 |  | 2022 |  | 2021 |  | 2020 |  | 2019 |  | Prior |  | Revolving Loans Amortized Cost Basis |  | Revolving Loans Converted to Term |  | Total
Other construction loans and all land development and other land loans |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Risk rating |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Pass | $ | 111,843 |  |  | $ | 269,531 |  |  | $ | 69,470 |  |  | $ | 19,028 |  |  | $ | 6,086 |  |  | $ | 1,262 |  |  | $ | 7,400 |  |  | $ | — |  |  | $ | 484,620 |
Special mention | — |  |  | 5,307 |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | 5,307 |
Substandard | — |  |  | — |  |  | — |  |  | — |  |  | 1,549 |  |  | — |  |  | 63 |  |  | — |  |  | 1,612 |
Total | $ | 111,843 |  |  | $ | 274,838 |  |  | $ | 69,470 |  |  | $ | 19,028 |  |  | $ | 7,635 |  |  | $ | 1,262 |  |  | $ | 7,463 |  |  | $ | — |  |  | $ | 491,539 |
Current period gross write offs | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | — |
Multifamily (5 or more) residential properties |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Risk rating |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Pass | $ | 37,366 |  |  | $ | 95,635 |  |  | $ | 63,203 |  |  | $ | 24,527 |  |  | $ | 10,928 |  |  | $ | 19,786 |  |  | $ | 754 |  |  | $ | — |  |  | $ | 252,199 |
Special mention | 1,346 |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | 1,346 |
Substandard | 797 |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | 797 |
Total | $ | 39,509 |  |  | $ | 95,635 |  |  | $ | 63,203 |  |  | $ | 24,527 |  |  | $ | 10,928 |  |  | $ | 19,786 |  |  | $ | 754 |  |  | $ | — |  |  | $ | 254,342 |
Current period gross write offs | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | 65 |  |  | $ | — |  |  | $ | — |  |  | $ | 65 |
Non-owner occupied, nonfarm nonresidential properties |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Risk rating |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Pass | $ | 192,826 |  |  | $ | 297,394 |  |  | $ | 151,365 |  |  | $ | 39,585 |  |  | $ | 54,388 |  |  | $ | 125,532 |  |  | $ | 8,174 |  |  | $ | — |  |  | $ | 869,264 |
Special mention | — |  |  | — |  |  | — |  |  | 1,887 |  |  | — |  |  | 688 |  |  | 433 |  |  | — |  |  | 3,008 |
Substandard | 778 |  |  | 1,134 |  |  | 488 |  |  | 5,911 |  |  | 3,266 |  |  | 10,484 |  |  | 1,710 |  |  | — |  |  | 23,771 |
Total | $ | 193,604 |  |  | $ | 298,528 |  |  | $ | 151,853 |  |  | $ | 47,383 |  |  | $ | 57,654 |  |  | $ | 136,704 |  |  | $ | 10,317 |  |  | $ | — |  |  | $ | 896,043 |
Current period gross write offs | $ | — |  |  | $ | 358 |  |  | $ | — |  |  | $ | — |  |  | $ | 88 |  |  | $ | — |  |  | $ | 248 |  |  | $ | — |  |  | $ | 694 |

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The following tables detail the amortized cost of loans receivable, by year of origination (for term loans) and by risk grade within each portfolio segment as of December 31, 2022. Current period originations may include modifications.

| Term Loans Amortized Cost Basis by Origination Year |  |  |  |  |  |
| 2022 |  | 2021 |  | 2020 |  | 2019 |  | 2018 |  | Prior |  | Revolving Loans Amortized Cost Basis |  | Revolving Loans Converted to Term |  | Total
Farmland |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Risk rating |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Pass | $ | 12,321 |  |  | $ | 7,635 |  |  | $ | 1,536 |  |  | $ | 871 |  |  | $ | 3,277 |  |  | $ | 3,523 |  |  | $ | 543 |  |  | $ | — |  |  | $ | 29,706 |
Special mention | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | 1,450 |  |  | — |  |  | — |  |  | 1,450 |
Substandard | — |  |  | 347 |  |  | — |  |  | — |  |  | 142 |  |  | 523 |  |  | — |  |  | — |  |  | 1,012 |
Total | $ | 12,321 |  |  | $ | 7,982 |  |  | $ | 1,536 |  |  | $ | 871 |  |  | $ | 3,419 |  |  | $ | 5,496 |  |  | $ | 543 |  |  | $ | — |  |  | $ | 32,168 |
Owner-occupied, nonfarm nonresidential properties |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Risk rating |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Pass | $ | 116,701 |  |  | $ | 113,575 |  |  | $ | 50,226 |  |  | $ | 55,040 |  |  | $ | 25,327 |  |  | $ | 60,810 |  |  | $ | 11,788 |  |  | $ | — |  |  | $ | 433,467 |
Special mention | 3,402 |  |  | — |  |  | 15,613 |  |  | 872 |  |  | 4,097 |  |  | 814 |  |  | 2,998 |  |  | — |  |  | 27,796 |
Substandard | — |  |  | — |  |  | 355 |  |  | 1,864 |  |  | 862 |  |  | 4,149 |  |  | — |  |  | — |  |  | 7,230 |
Total | $ | 120,103 |  |  | $ | 113,575 |  |  | $ | 66,194 |  |  | $ | 57,776 |  |  | $ | 30,286 |  |  | $ | 65,773 |  |  | $ | 14,786 |  |  | $ | — |  |  | $ | 468,493 |
Agricultural production and other loans to farmers |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Risk rating |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Pass | $ | 105 |  |  | $ | 140 |  |  | $ | 80 |  |  | $ | 42 |  |  | $ | 179 |  |  | $ | — |  |  | $ | 652 |  |  | $ | — |  |  | $ | 1,198 |
Special mention | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |
Substandard | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |
Total | $ | 105 |  |  | $ | 140 |  |  | $ | 80 |  |  | $ | 42 |  |  | $ | 179 |  |  | $ | — |  |  | $ | 652 |  |  | $ | — |  |  | $ | 1,198 |
Commercial and Industrial |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Risk rating |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Pass | $ | 195,955 |  |  | $ | 213,433 |  |  | $ | 51,695 |  |  | $ | 16,730 |  |  | $ | 9,051 |  |  | $ | 19,116 |  |  | $ | 259,841 |  |  | $ | — |  |  | $ | 765,821 |
Special mention | 241 |  |  | — |  |  | 6,691 |  |  | 273 |  |  | 81 |  |  | 45 |  |  | 7,409 |  |  | — |  |  | 14,740 |
Substandard | 299 |  |  | 1,809 |  |  | 689 |  |  | 379 |  |  | 324 |  |  | 913 |  |  | 5,624 |  |  | — |  |  | 10,037 |
Doubtful(1) | — |  |  | 1,313 |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | 1,313 |
Total | $ | 196,495 |  |  | $ | 216,555 |  |  | $ | 59,075 |  |  | $ | 17,382 |  |  | $ | 9,456 |  |  | $ | 20,074 |  |  | $ | 272,874 |  |  | $ | — |  |  | $ | 791,911 |
Obligations (other than securities and leases) of states and political subdivisions |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Risk rating |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Pass | $ | 20,840 |  |  | $ | 37,527 |  |  | $ | 13,868 |  |  | $ | 4,584 |  |  | $ | 13,518 |  |  | $ | 50,050 |  |  | $ | 4,958 |  |  | $ | — |  |  | $ | 145,345 |
Special mention | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |
Substandard | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |
Total | $ | 20,840 |  |  | $ | 37,527 |  |  | $ | 13,868 |  |  | $ | 4,584 |  |  | $ | 13,518 |  |  | $ | 50,050 |  |  | $ | 4,958 |  |  | $ | — |  |  | $ | 145,345 |
Other loans |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Risk rating |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Pass | $ | 14,248 |  |  | $ | 5,358 |  |  | $ | 2,278 |  |  | $ | 363 |  |  | $ | — |  |  | $ | — |  |  | $ | 2,463 |  |  | $ | — |  |  | $ | 24,710 |
Special mention | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |
Substandard | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |
Total | $ | 14,248 |  |  | $ | 5,358 |  |  | $ | 2,278 |  |  | $ | 363 |  |  | $ | — |  |  | $ | — |  |  | $ | 2,463 |  |  | $ | — |  |  | $ | 24,710 |

(1) Consists of one loan relationship originated in 2015 and modified in 2021. The modification met the requirements to disclose the loan relationship as a new loan during 2021.
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| Term Loans Amortized Cost Basis by Origination Year |  |  |  |  |  |
| 2022 |  | 2021 |  | 2020 |  | 2019 |  | 2018 |  | Prior |  | Revolving Loans Amortized Cost Basis |  | Revolving Loans Converted to Term |  | Total
Other construction loans and all land development and other land loans |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Risk rating |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Pass | $ | 272,118 |  |  | $ | 86,894 |  |  | $ | 56,782 |  |  | $ | 6,918 |  |  | $ | 8,644 |  |  | $ | 916 |  |  | $ | 11,028 |  |  | $ | — |  |  | $ | 443,300 |
Special mention | 1,296 |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | 1,296 |
Substandard | — |  |  | 2,023 |  |  | — |  |  | — |  |  | — |  |  | — |  |  | 66 |  |  | — |  |  | 2,089 |
Total | $ | 273,414 |  |  | $ | 88,917 |  |  | $ | 56,782 |  |  | $ | 6,918 |  |  | $ | 8,644 |  |  | $ | 916 |  |  | $ | 11,094 |  |  | $ | — |  |  | $ | 446,685 |
Multifamily (5 or more) residential properties |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Risk rating |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Pass | $ | 114,454 |  |  | $ | 49,794 |  |  | $ | 46,784 |  |  | $ | 11,854 |  |  | $ | 6,764 |  |  | $ | 23,841 |  |  | $ | 2,629 |  |  | $ | — |  |  | $ | 256,120 |
Special mention | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | 510 |  |  | — |  |  | — |  |  | 510 |
Substandard | 643 |  |  | — |  |  | — |  |  | — |  |  | 333 |  |  | 90 |  |  | — |  |  | — |  |  | 1,066 |
Total | $ | 115,097 |  |  | $ | 49,794 |  |  | $ | 46,784 |  |  | $ | 11,854 |  |  | $ | 7,097 |  |  | $ | 24,441 |  |  | $ | 2,629 |  |  | $ | — |  |  | $ | 257,696 |
Non-owner occupied, nonfarm nonresidential properties |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Risk rating |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Pass | $ | 339,151 |  |  | $ | 153,613 |  |  | $ | 51,709 |  |  | $ | 66,592 |  |  | $ | 45,211 |  |  | $ | 107,988 |  |  | $ | 8,186 |  |  | $ | — |  |  | $ | 772,450 |
Special mention | — |  |  | 488 |  |  | — |  |  | 273 |  |  | 498 |  |  | 1,068 |  |  | 464 |  |  | — |  |  | 2,791 |
Substandard | 2,227 |  |  | 800 |  |  | — |  |  | 4,090 |  |  | 1,314 |  |  | 9,587 |  |  | 2,056 |  |  | — |  |  | 20,074 |
Total | $ | 341,378 |  |  | $ | 154,901 |  |  | $ | 51,709 |  |  | $ | 70,955 |  |  | $ | 47,023 |  |  | $ | 118,643 |  |  | $ | 10,706 |  |  | $ | — |  |  | $ | 795,315 |

The Corporation considers the performance of the loan portfolio and its impact on the allowance for credit losses. For 1-4 family construction, home equity lines of credit, residential mortgages secured by first liens, residential mortgages secured by junior liens, automobile, credit cards, other revolving credit plans and other consumer segments, the Corporation evaluates credit quality based on the performance status of the loan, which was previously presented, and by payment activity. Nonperforming loans include loans receivable on nonaccrual status and loans receivable past due over 89 days and still accruing interest.

| December 31, 2023 |  | December 31, 2022
| Performing |  | Nonperforming |  | Total |  | Performing |  | Nonperforming |  | Total
1-4 Family Construction | $ | 51,207 |  |  | $ | — |  |  | $ | 51,207 |  |  | $ | 51,171 |  |  | $ | — |  |  | $ | 51,171 |
Home equity lines of credit | 129,760 |  |  | 940 |  |  | 130,700 |  |  | 124,417 |  |  | 475 |  |  | 124,892 |
Residential Mortgages secured by first liens | 985,647 |  |  | 5,339 |  |  | 990,986 |  |  | 938,154 |  |  | 4,377 |  |  | 942,531 |
Residential Mortgages secured by junior liens | 90,940 |  |  | 123 |  |  | 91,063 |  |  | 74,547 |  |  | 91 |  |  | 74,638 |
Other revolving credit plans | 42,796 |  |  | 81 |  |  | 42,877 |  |  | 36,346 |  |  | 26 |  |  | 36,372 |
Automobile | 25,236 |  |  | 79 |  |  | 25,315 |  |  | 21,787 |  |  | 19 |  |  | 21,806 |
Other consumer | 50,794 |  |  | 798 |  |  | 51,592 |  |  | 48,363 |  |  | 781 |  |  | 49,144 |
Total loans | $ | 1,376,380 |  |  | $ | 7,360 |  |  | $ | 1,383,740 |  |  | $ | 1,294,785 |  |  | $ | 5,769 |  |  | $ | 1,300,554 |

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The following tables detail the amortized cost of loans receivable, by year of origination (for term loans) and by payment activity within each portfolio segment as of December 31, 2023. The current period originations may include modifications, extensions and renewals.

| Term Loans Amortized Cost Basis by Origination Year |  |  |  |  |  |
| 2023 |  | 2022 |  | 2021 |  | 2020 |  | 2019 |  | Prior |  | Revolving Loans Amortized Cost Basis |  | Revolving Loans Converted to Term |  | Total
1-4 Family Construction |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Payment performance |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Performing | $ | 23,465 |  |  | $ | 14,915 |  |  | $ | 10,079 |  |  | $ | 1,206 |  |  | $ | 685 |  |  | $ | 58 |  |  | $ | 799 |  |  | $ | — |  |  | $ | 51,207 |
Nonperforming | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |
Total | $ | 23,465 |  |  | $ | 14,915 |  |  | $ | 10,079 |  |  | $ | 1,206 |  |  | $ | 685 |  |  | $ | 58 |  |  | $ | 799 |  |  | $ | — |  |  | $ | 51,207 |
Current period gross write offs | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | — |
Home equity lines of credit |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Payment performance |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Performing | $ | 27,110 |  |  | $ | 32,027 |  |  | $ | 11,437 |  |  | $ | 9,844 |  |  | $ | 6,781 |  |  | $ | 30,467 |  |  | $ | 7,479 |  |  | $ | 4,615 |  |  | $ | 129,760 |
Nonperforming | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | 14 |  |  | — |  |  | 926 |  |  | 940 |
Total | $ | 27,110 |  |  | $ | 32,027 |  |  | $ | 11,437 |  |  | $ | 9,844 |  |  | $ | 6,781 |  |  | $ | 30,481 |  |  | $ | 7,479 |  |  | $ | 5,541 |  |  | $ | 130,700 |
Current period gross write offs | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | 10 |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | 10 |
Residential mortgages secured by first lien |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Payment performance |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Performing | $ | 134,522 |  |  | $ | 233,346 |  |  | $ | 199,997 |  |  | $ | 143,318 |  |  | $ | 77,293 |  |  | $ | 194,010 |  |  | $ | 3,161 |  |  | $ | — |  |  | $ | 985,647 |
Nonperforming | 497 |  |  | 174 |  |  | 787 |  |  | 615 |  |  | 492 |  |  | 2,736 |  |  | 38 |  |  | — |  |  | 5,339 |
Total | $ | 135,019 |  |  | $ | 233,520 |  |  | $ | 200,784 |  |  | $ | 143,933 |  |  | $ | 77,785 |  |  | $ | 196,746 |  |  | $ | 3,199 |  |  | $ | — |  |  | $ | 990,986 |
Current period gross write offs | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | 22 |  |  | $ | 95 |  |  | $ | — |  |  | $ | 117 |
Residential mortgages secured by junior liens |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Payment performance |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Performing | $ | 28,685 |  |  | $ | 27,032 |  |  | $ | 14,027 |  |  | $ | 7,102 |  |  | $ | 3,888 |  |  | $ | 8,833 |  |  | $ | 1,373 |  |  | $ | — |  |  | $ | 90,940 |
Nonperforming | — |  |  | 38 |  |  | — |  |  | — |  |  | — |  |  | 42 |  |  | 43 |  |  | — |  |  | 123 |
Total | $ | 28,685 |  |  | $ | 27,070 |  |  | $ | 14,027 |  |  | $ | 7,102 |  |  | $ | 3,888 |  |  | $ | 8,875 |  |  | $ | 1,416 |  |  | $ | — |  |  | $ | 91,063 |
Current period gross write offs | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | — |
Other revolving credit plans |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Payment performance |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Performing | $ | 8,684 |  |  | $ | 8,027 |  |  | $ | 2,732 |  |  | $ | 11,274 |  |  | $ | 1,634 |  |  | $ | 10,445 |  |  | $ | — |  |  | $ | — |  |  | $ | 42,796 |
Nonperforming | — |  |  | 29 |  |  | 5 |  |  | — |  |  | — |  |  | 47 |  |  | — |  |  | — |  |  | 81 |
Total | $ | 8,684 |  |  | $ | 8,056 |  |  | $ | 2,737 |  |  | $ | 11,274 |  |  | $ | 1,634 |  |  | $ | 10,492 |  |  | $ | — |  |  | $ | — |  |  | $ | 42,877 |
Current period gross write offs | $ | — |  |  | $ | — |  |  | $ | 50 |  |  | $ | 4 |  |  | $ | 16 |  |  | $ | 49 |  |  | $ | — |  |  | $ | — |  |  | $ | 119 |
Automobile |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Payment performance |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Performing | $ | 12,545 |  |  | $ | 6,800 |  |  | $ | 2,597 |  |  | $ | 1,472 |  |  | $ | 1,025 |  |  | $ | 797 |  |  | $ | — |  |  | $ | — |  |  | $ | 25,236 |
Nonperforming | 16 |  |  | 51 |  |  | — |  |  | 7 |  |  | 5 |  |  | — |  |  | — |  |  | — |  |  | 79 |
Total | $ | 12,561 |  |  | $ | 6,851 |  |  | $ | 2,597 |  |  | $ | 1,479 |  |  | $ | 1,030 |  |  | $ | 797 |  |  | $ | — |  |  | $ | — |  |  | $ | 25,315 |
Current period gross write offs | $ | 18 |  |  | $ | 23 |  |  | $ | — |  |  | $ | 8 |  |  | $ | 7 |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | 56 |
Other consumer |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Payment performance |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Performing | $ | 27,202 |  |  | $ | 12,261 |  |  | $ | 5,255 |  |  | $ | 3,107 |  |  | $ | 1,471 |  |  | $ | 1,498 |  |  | $ | — |  |  | $ | — |  |  | $ | 50,794 |
Nonperforming | 283 |  |  | 330 |  |  | 116 |  |  | 12 |  |  | 6 |  |  | 51 |  |  | — |  |  | — |  |  | 798 |
Total | $ | 27,485 |  |  | $ | 12,591 |  |  | $ | 5,371 |  |  | $ | 3,119 |  |  | $ | 1,477 |  |  | $ | 1,549 |  |  | $ | — |  |  | $ | — |  |  | $ | 51,592 |
Current period gross write offs | $ | 210 |  |  | $ | 1,164 |  |  | $ | 467 |  |  | $ | 96 |  |  | $ | 33 |  |  | $ | 12 |  |  | $ | — |  |  | $ | — |  |  | $ | 1,982 |

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The following tables detail the amortized cost of loans receivable, by year of origination (for term loans) and by payment activity within each portfolio segment as of December 31, 2022. The current period originations may include modifications, extensions and renewals.

| Term Loans Amortized Cost Basis by Origination Year |  |  |  |  |  |
| 2022 |  | 2021 |  | 2020 |  | 2019 |  | 2018 |  | Prior |  | Revolving Loans Amortized Cost Basis |  | Revolving Loans Converted to Term |  | Total
1-4 Family Construction |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Payment performance |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Performing | $ | 30,451 |  |  | $ | 16,360 |  |  | $ | 2,577 |  |  | $ | 752 |  |  | $ | 62 |  |  | $ | — |  |  | $ | 969 |  |  | $ | — |  |  | $ | 51,171 |
Nonperforming | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |
Total | $ | 30,451 |  |  | $ | 16,360 |  |  | $ | 2,577 |  |  | $ | 752 |  |  | $ | 62 |  |  | $ | — |  |  | $ | 969 |  |  | $ | — |  |  | $ | 51,171 |
Home equity lines of credit |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Payment performance |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Performing | $ | 34,738 |  |  | $ | 13,654 |  |  | $ | 12,903 |  |  | $ | 8,587 |  |  | $ | 7,924 |  |  | $ | 38,127 |  |  | $ | 8,484 |  |  | $ | — |  |  | $ | 124,417 |
Nonperforming | — |  |  | — |  |  | — |  |  | 10 |  |  | — |  |  | 465 |  |  | — |  |  | — |  |  | 475 |
Total | $ | 34,738 |  |  | $ | 13,654 |  |  | $ | 12,903 |  |  | $ | 8,597 |  |  | $ | 7,924 |  |  | $ | 38,592 |  |  | $ | 8,484 |  |  | $ | — |  |  | $ | 124,892 |
Residential mortgages secured by first lien |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Payment performance |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Performing | $ | 229,842 |  |  | $ | 222,522 |  |  | $ | 159,651 |  |  | $ | 91,238 |  |  | $ | 49,587 |  |  | $ | 181,939 |  |  | $ | 3,375 |  |  | $ | — |  |  | $ | 938,154 |
Nonperforming | — |  |  | 771 |  |  | 273 |  |  | 581 |  |  | 416 |  |  | 2,150 |  |  | 186 |  |  | — |  |  | 4,377 |
Total | $ | 229,842 |  |  | $ | 223,293 |  |  | $ | 159,924 |  |  | $ | 91,819 |  |  | $ | 50,003 |  |  | $ | 184,089 |  |  | $ | 3,561 |  |  | $ | — |  |  | $ | 942,531 |
Residential mortgages secured by junior liens |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Payment performance |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Performing | $ | 31,837 |  |  | $ | 17,163 |  |  | $ | 8,326 |  |  | $ | 4,956 |  |  | $ | 3,073 |  |  | $ | 8,395 |  |  | $ | 797 |  |  | $ | — |  |  | $ | 74,547 |
Nonperforming | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | 47 |  |  | 44 |  |  | — |  |  | 91 |
Total | $ | 31,837 |  |  | $ | 17,163 |  |  | $ | 8,326 |  |  | $ | 4,956 |  |  | $ | 3,073 |  |  | $ | 8,442 |  |  | $ | 841 |  |  | $ | — |  |  | $ | 74,638 |
Other revolving credit plans |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Payment performance |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Performing | $ | 10,778 |  |  | $ | 2,820 |  |  | $ | 7,911 |  |  | $ | 2,264 |  |  | $ | 2,265 |  |  | $ | 10,308 |  |  | $ | — |  |  | $ | — |  |  | $ | 36,346 |
Nonperforming | — |  |  | — |  |  | — |  |  | 4 |  |  | 14 |  |  | 8 |  |  | — |  |  | — |  |  | 26 |
Total | $ | 10,778 |  |  | $ | 2,820 |  |  | $ | 7,911 |  |  | $ | 2,268 |  |  | $ | 2,279 |  |  | $ | 10,316 |  |  | $ | — |  |  | $ | — |  |  | $ | 36,372 |
Automobile |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Payment performance |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Performing | $ | 10,146 |  |  | $ | 4,637 |  |  | $ | 2,945 |  |  | $ | 2,349 |  |  | $ | 1,117 |  |  | $ | 593 |  |  | $ | — |  |  | $ | — |  |  | $ | 21,787 |
Nonperforming | — |  |  | — |  |  | 10 |  |  | 7 |  |  | 2 |  |  | — |  |  | — |  |  | — |  |  | 19 |
Total | $ | 10,146 |  |  | $ | 4,637 |  |  | $ | 2,955 |  |  | $ | 2,356 |  |  | $ | 1,119 |  |  | $ | 593 |  |  | $ | — |  |  | $ | — |  |  | $ | 21,806 |
Other consumer |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Payment performance |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Performing | $ | 26,699 |  |  | $ | 12,120 |  |  | $ | 5,333 |  |  | $ | 2,176 |  |  | $ | 776 |  |  | $ | 1,259 |  |  | $ | — |  |  | $ | — |  |  | $ | 48,363 |
Nonperforming | 403 |  |  | 220 |  |  | 85 |  |  | 22 |  |  | 6 |  |  | 45 |  |  | — |  |  | — |  |  | 781 |
Total | $ | 27,102 |  |  | $ | 12,340 |  |  | $ | 5,418 |  |  | $ | 2,198 |  |  | $ | 782 |  |  | $ | 1,304 |  |  | $ | — |  |  | $ | — |  |  | $ | 49,144 |

| December 31, 2023 |  | December 31, 2022
Credit card |  |  |
Payment performance |  |  |
Performing | $ | 11,753 |  |  | $ | 10,817 |
Nonperforming | 32 |  |  | 8 |
Total | $ | 11,785 |  |  | $ | 10,825 |
Current period gross write offs | $ | 189 |  |  |

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Holiday’s loan portfolio, included in other consumer loans above, is summarized as follows at December 31, 2023 and 2022:

| December 31, 2023 |  | December 31, 2022
Gross consumer loans | $ | 31,242 |  |  | $ | 31,821 |
Less: unearned discounts | (5,696) |  |  | (5,972) |
Total consumer loans, net of unearned discounts | $ | 25,546 |  |  | $ | 25,849 |

4. Fair Value
Fair Value Measurement
Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date.
The following three levels of inputs are used to measure fair value:
Level 1: Quoted prices (unadjusted) for identical assets or liabilities in active markets that the entity has the ability to access as of the measurement date.
Level 2: Significant other observable inputs other than Level 1 prices such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data.
Level 3: Significant unobservable inputs that reflect a company’s own assumptions about the assumptions that market participants would use in pricing an asset or liability.
The Corporation used the following methods and significant assumptions to estimate fair value:
Investment Securities: The fair values for investment securities are determined by quoted market prices, if available (Level 1). For securities where quoted prices are not available, fair values are calculated based on market prices of similar securities (Level 2), using matrix pricing. Matrix pricing is a mathematical technique commonly used to price debt securities that are not actively traded, values debt securities without relying exclusively on quoted prices for the specific securities but rather by relying on the securities’ relationship to other benchmark quoted securities (Level 2 inputs). For securities where quoted prices or market prices of similar securities are not available, fair values are calculated using discounted cash flows or other market indicators (Level 3).
Loans Held for Sale: Loans held for sale are carried at the lower of cost or fair value, which is evaluated on a loan-level basis. The fair value of loans held for sale is determined using quoted prices for similar assets, adjusted for specific attributes of that loan or other observable market data, such as outstanding commitments from third party investors (Level 2).
Derivatives: The fair values of derivatives are based on valuation models using observable market data as of the measurement date (Level 2). The Corporation's derivatives are traded in an over-the-counter market where quoted market prices are not always available. Therefore, the fair values of derivatives are determined using quantitative models that utilize multiple market inputs. The inputs will vary based on the type of derivative, but could include interest rates, prices, and indices to generate continuous yield or pricing curves, prepayment rates, and volatility factors to value the position. The majority of market inputs are actively quoted and can be validated through external sources, including brokers, market transactions, and third-party pricing services.
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Individually Evaluated Loans: The fair value of individually evaluated loans with specific allocations of the allowance for credit losses is generally based on recent real estate appraisals prepared by third-parties. These appraisals may utilize a single valuation approach or a combination of approaches including comparable sales and the income approach. Adjustments are routinely made in the appraisal process by the appraisers to adjust for differences between the comparable sales and income data available. Management also adjusts appraised values based on the length of time that has passed since the appraisal date and other factors. Such adjustments are usually significant and typically result in a Level 3 classification of the inputs for determining fair value. Non-real estate collateral may be valued using an appraisal, net book value per the borrower's financial statements, or aging reports, adjusted or discounted based on management's historical knowledge, changes in market conditions from the time of the valuation, and management's expertise and knowledge of the client and client's business, resulting in a Level 3 fair value classification. Individually evaluated loans are evaluated on a quarterly basis for additional impairment and adjusted in accordance with the allowance policy.
Assets and liabilities measured at fair value on a recurring basis were as follows at December 31, 2023 and 2022:

|  |  | Fair Value Measurements at December 31, 2023 Using
Description | Total |  | Quoted Prices in Active Markets for Identical Assets (Level 1) |  | Significant Other Observable Inputs (Level 2) |  | Significant Unobservable Inputs (Level 3)
Assets: |  |  |  |  |  |  |
Securities Available-For-Sale: |  |  |  |  |  |  |
U.S. Government sponsored entities (1) | $ | 4,988 |  |  | $ | 4,988 |  |  | $ | — |  |  | $ | — |
States and political subdivisions | 91,809 |  |  | — |  |  | 91,809 |  |  | — |
Residential and multi-family mortgage | 191,519 |  |  | — |  |  | 191,519 |  |  | — |
Corporate notes and bonds | 43,139 |  |  | — |  |  | 43,139 |  |  | — |
Pooled SBA | 10,500 |  |  | — |  |  | 10,500 |  |  | — |
Total Securities Available-For-Sale | $ | 341,955 |  |  | $ | 4,988 |  |  | $ | 336,967 |  |  | $ | — |
Interest rate swaps | $ | 1,013 |  |  | $ | — |  |  | $ | 1,013 |  |  | $ | — |
Equity Securities: |  |  |  |  |  |  |
Corporate equity securities | $ | 5,341 |  |  | $ | 5,341 |  |  | $ | — |  |  | $ | — |
Mutual funds | 2,223 |  |  | 2,223 |  |  | — |  |  | — |
Money market | 1,103 |  |  | 1,103 |  |  | — |  |  | — |
Corporate notes | 634 |  |  | — |  |  | 634 |  |  | — |
Total Equity Securities | $ | 9,301 |  |  | $ | 8,667 |  |  | $ | 634 |  |  | $ | — |
Liabilities |  |  |  |  |  |  |
Interest rate swaps | $ | (1,013) |  |  | $ | — |  |  | $ | (1,013) |  |  | $ | — |

(1) In 2023, the Corporation transitioned to a new pricing provider, leading to the reclassification of United States Treasury investments as Level 1 pricing instruments.

|  |  | Fair Value Measurements at December 31, 2022 Using
Description | Total |  | Quoted Prices in Active Markets for Identical Assets (Level 1) |  | Significant Other Observable Inputs (Level 2) |  | Significant Unobservable Inputs (Level 3)
Assets: |  |  |  |  |  |  |
Securities Available-For-Sale: |  |  |  |  |  |  |
U.S. Government sponsored entities | $ | 3,129 |  |  | $ | — |  |  | $ | 3,129 |  |  | $ | — |
States and political subdivisions | 95,663 |  |  | — |  |  | 95,663 |  |  | — |
Residential and multi-family mortgage | 217,547 |  |  | — |  |  | 217,547 |  |  | — |
Corporate notes and bonds | 42,391 |  |  | — |  |  | 42,391 |  |  | — |
Pooled SBA | 12,679 |  |  | — |  |  | 12,679 |  |  | — |
Total Securities Available-For-Sale | $ | 371,409 |  |  | $ | — |  |  | $ | 371,409 |  |  | $ | — |
Interest rate swaps | $ | 1,850 |  |  | $ | — |  |  | $ | 1,850 |  |  | $ | — |
Equity Securities: |  |  |  |  |  |  |
Corporate equity securities | $ | 6,973 |  |  | $ | 6,973 |  |  | $ | — |  |  | $ | — |
Mutual funds | 1,406 |  |  | 1,406 |  |  | — |  |  | — |
Money market | 479 |  |  | 479 |  |  | — |  |  | — |
Corporate notes | 757 |  |  | 757 |  |  | — |  |  | — |
Total Equity Securities | $ | 9,615 |  |  | $ | 9,615 |  |  | $ | — |  |  | $ | — |
Liabilities |  |  |  |  |  |  |
Interest rate swaps | $ | (1,700) |  |  | $ | — |  |  | $ | (1,700) |  |  | $ | — |

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Assets and liabilities measured at fair value on a non-recurring basis are as follows at December 31, 2023 and 2022:

|  |  | Fair Value Measurements at December 31, 2023 Using
Description | Total |  | Quoted Prices in Active Markets for Identical Assets (Level 1) |  | Significant Other Observable Inputs (Level 2) |  | Significant Unobservable Inputs (Level 3)
Assets: |  |  |  |  |  |  |
Collateral-dependent loans: |  |  |  |  |  |  |
Farmland | $ | 736 |  |  | $ | — |  |  | $ | — |  |  | $ | 736 |
Owner-occupied, nonfarm nonresidential properties | 5,589 |  |  | — |  |  | — |  |  | 5,589 |
Commercial and industrial | 7,425 |  |  | — |  |  | — |  |  | 7,425 |
Other construction loans and all land development loans and other land loans | 1,299 |  |  | — |  |  | — |  |  | 1,299 |
Multifamily (5 or more) residential properties | 305 |  |  | — |  |  | — |  |  | 305 |
Non-owner occupied, nonfarm nonresidential | 7,216 |  |  | — |  |  | — |  |  | 7,216 |
Home equity lines of credit | 308 |  |  | — |  |  | — |  |  | 308 |
Residential mortgages secured by first liens | 871 |  |  | — |  |  | — |  |  | 871 |

|  |  | Fair Value Measurements at December 31, 2022 Using
Description | Total |  | Quoted Prices in Active Markets for Identical Assets (Level 1) |  | Significant Other Observable Inputs (Level 2) |  | Significant Unobservable Inputs (Level 3)
Assets: |  |  |  |  |  |  |
Collateral-dependent loans: |  |  |  |  |  |  |
Farmland | $ | 829 |  |  | $ | — |  |  | $ | — |  |  | $ | 829 |
Owner-occupied, nonfarm nonresidential properties | 1,071 |  |  | — |  |  | — |  |  | 1,071 |
Commercial and industrial | 1,631 |  |  | — |  |  | — |  |  | 1,631 |
Other construction loans and all land development loans and other land loans | 501 |  |  | — |  |  | — |  |  | 501 |
Multifamily (5 or more) residential properties | 613 |  |  | — |  |  | — |  |  | 613 |
Non-owner occupied, nonfarm nonresidential | 3,867 |  |  | — |  |  | — |  |  | 3,867 |
Home equity lines of credit | 335 |  |  | — |  |  | — |  |  | 335 |
Residential mortgages secured by first liens | 944 |  |  | — |  |  | — |  |  | 944 |

A loan is considered to be a collateral dependent loan when, based on current information and events, the Corporation expects repayment of the financial assets to be provided substantially through the operation or sale of the collateral and the Corporation has determined that the borrower is experiencing financial difficulty as of the measurement date. The allowance for credit losses is measured by estimating the fair value of the loan based on the present value of expected cash flows, the market price of the loan, or the underlying fair value of the loan’s collateral. For real estate loans, fair value of the loan’s collateral is determined by third-party appraisals, which are then adjusted for the estimated selling and closing costs related to liquidation of the collateral. For this asset class, the actual valuation methods (income, sales comparable, or cost) vary based on the status of the project or property. For example, land is generally based on the sales comparable method while construction is based on the income and/or sales comparable methods. The unobservable inputs may vary depending on the individual assets with no one of the three methods being the predominant approach. The Corporation reviews the third-party appraisal for appropriateness and may adjust the value downward to consider selling and closing costs. For non-real estate loans, fair value of the loan’s collateral may be determined using an appraisal, net book value per the borrower’s financial statements, or aging reports, adjusted or discounted based on management’s historical knowledge, changes in market conditions from the time of the valuation, and management’s expertise and knowledge of the client and client’s business.
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The following table presents quantitative information about Level 3 fair value measurements for financial instruments measured at fair value on a non-recurring basis at December 31, 2023:

| Fair value |  | Valuation Technique |  | Unobservable Inputs |  | Range (Weighted Average)
Collateral-dependent loans receivable: |  |  |  |  |  |  |
Farmland | $ | 736 |  |  | Valuation of third party appraisal on underlying collateral |  | Loss severity rates |  | 29%-31% (30%)
Owner-occupied, nonfarm nonresidential properties | 5,589 |  |  | Valuation of third party appraisal on underlying collateral |  | Loss severity rates |  | 9%-100% (14%)
Commercial and industrial | 7,425 |  |  | Valuation of third party appraisal on underlying collateral |  | Loss severity rates |  | 8%-75% (31%)
Other construction loans and all land development loans and other land loans | 1,299 |  |  | Valuation of third party appraisal on underlying collateral |  | Loss severity rates |  | 32% (32%)
Multifamily (5 or more) residential properties | 305 |  |  | Valuation of third party appraisal on underlying collateral |  | Loss severity rates |  | 28% (28%)
Non-owner occupied, nonfarm nonresidential | 7,216 |  |  | Valuation of third party appraisal on underlying collateral |  | Loss severity rates |  | 32%-48% (43%)
Home equity lines of credit | 308 |  |  | Valuation of third party appraisal on underlying collateral |  | Loss severity rates |  | 15%-17% (15%)
Residential mortgages secured by first liens | 871 |  |  | Valuation of third party appraisal on underlying collateral |  | Loss severity rates |  | 17%-42% (31%)

The following table presents quantitative information about Level 3 fair value measurements for financial instruments measured at fair value on a non-recurring basis at December 31, 2022:

| Fair value |  | Valuation Technique |  | Unobservable Inputs |  | Range (Weighted Average)
Collateral-dependent loans receivable: |  |  |  |  |  |  |
Farmland | $ | 829 |  |  | Valuation of third party appraisal on underlying collateral |  | Loss severity rates |  | 20% (20%)
Owner-occupied, nonfarm nonresidential properties | 1,071 |  |  | Valuation of third party appraisal on underlying collateral |  | Loss severity rates |  | 25%-100% (29%)
Commercial and industrial | 1,631 |  |  | Valuation of third party appraisal on underlying collateral |  | Loss severity rates |  | 3%-49% (23%)
Other construction loans and all land development loans and other land loans | 501 |  |  | Valuation of third party appraisal on underlying collateral |  | Loss severity rates |  | 33% (33%)
Multifamily (5 or more) residential properties | 613 |  |  | Valuation of third party appraisal on underlying collateral |  | Loss severity rates |  | 19%-25% (23%)
Non-owner occupied, nonfarm nonresidential | 3,867 |  |  | Valuation of third party appraisal on underlying collateral |  | Loss severity rates |  | 15%-53% (35%)
Home equity lines of credit | 335 |  |  | Valuation of third party appraisal on underlying collateral |  | Loss severity rates |  | 15% (15%)
Residential mortgages secured by first liens | 944 |  |  | Valuation of third party appraisal on underlying collateral |  | Loss severity rates |  | 17%-42% (31%)

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Fair Value of Financial Instruments
The following table presents the carrying amount and fair value of financial instruments at December 31, 2023:

| Carrying Amount |  | Fair Value Measurement Using: |  | Total Fair Value
| Level 1 |  | Level 2 |  | Level 3 |
Assets: |  |  |  |  |  |  |  |  |
Cash and cash equivalents | $ | 222,046 |  |  | $ | 222,046 |  |  | $ | — |  |  | $ | — |  |  | $ | 222,046 |
Debt securities available-for-sale (1) | 341,955 |  |  | 4,988 |  |  | 336,967 |  |  | — |  |  | 341,955 |
Debt securities held-to-maturity (1) | 388,968 |  |  | 104,141 |  |  | 256,429 |  |  | — |  |  | 360,570 |
Equity securities | 9,301 |  |  | 8,667 |  |  | 634 |  |  | — |  |  | 9,301 |
Loans held for sale | 675 |  |  | — |  |  | 677 |  |  | — |  |  | 677 |
Net loans receivable | 4,422,644 |  |  | — |  |  | — |  |  | 4,323,476 |  |  | 4,323,476 |
FHLB and other restricted stock holdings and investments | 30,011 |  |  | n/a |  | n/a |  | n/a |  | n/a
Interest rate swaps | 1,013 |  |  | — |  |  | 1,013 |  |  | — |  |  | 1,013 |
Accrued interest receivable | 24,318 |  |  | 410 |  |  | 2,319 |  |  | 21,589 |  |  | 24,318 |
Liabilities: |  |  |  |  |  |  |  |  |
Deposits | $ | (4,998,750) |  |  | $ | (4,492,256) |  |  | $ | (508,181) |  |  | $ | — |  |  | $ | (5,000,437) |
Subordinated debentures | (104,887) |  |  | — |  |  | (134,298) |  |  | — |  |  | (134,298) |
Interest rate swaps | (1,013) |  |  | — |  |  | (1,013) |  |  | — |  |  | (1,013) |
Accrued interest payable | (3,550) |  |  | — |  |  | (3,550) |  |  | — |  |  | (3,550) |

(1) In 2023, the Corporation transitioned to a new pricing provider, leading to the reclassification of United States Treasury investments as Level 1 pricing instruments.
The following table presents the carrying amount and fair value of financial instruments at December 31, 2022:

| Carrying Amount |  | Fair Value Measurement Using: |  | Total Fair Value
| Level 1 |  | Level 2 |  | Level 3 |
Assets: |  |  |  |  |  |  |  |  |
Cash and cash equivalents | $ | 106,285 |  |  | $ | 106,285 |  |  | $ | — |  |  | $ | — |  |  | $ | 106,285 |
Debt securities available-for-sale | 371,409 |  |  | — |  |  | 371,409 |  |  | — |  |  | 371,409 |
Debt securities held-to-maturity | 404,765 |  |  | — |  |  | 367,388 |  |  | — |  |  | 367,388 |
Equity securities | 9,615 |  |  | 9,615 |  |  |  |  |  |  | 9,615 |
Loans held for sale | 231 |  |  | — |  |  | 231 |  |  | — |  |  | 231 |
Net loans | 4,231,742 |  |  | — |  |  | — |  |  | 4,157,843 |  |  | 4,157,843 |
FHLB and other equity interests | 30,715 |  |  | n/a |  | n/a |  | n/a |  | n/a
Interest rate swaps | 1,850 |  |  | — |  |  | 1,850 |  |  | — |  |  | 1,850 |
Accrued interest receivable | 20,194 |  |  | — |  |  | 2,867 |  |  | 17,327 |  |  | 20,194 |
Liabilities: |  |  |  |  |  |  |  |  |
Deposits | $ | (4,622,437) |  |  | $ | (4,175,976) |  |  | $ | (445,788) |  |  | $ | — |  |  | $ | (4,621,764) |
FHLB and other borrowings | (132,396) |  |  | — |  |  | (132,396) |  |  | — |  |  | (132,396) |
Subordinated debentures | (104,584) |  |  | — |  |  | (117,378) |  |  | — |  |  | (117,378) |
Interest rate swaps | (1,700) |  |  | — |  |  | (1,700) |  |  | — |  |  | (1,700) |
Accrued interest payable | (1,839) |  |  | — |  |  | (1,839) |  |  | — |  |  | (1,839) |

While estimates of fair value are based on management’s judgment of the most appropriate factors as of the balance sheet dates, there is no assurance that the estimated fair values would have been realized if the assets had been disposed of or the liabilities settled at that date, since market values may differ depending on various circumstances. The estimated fair values would also not apply to subsequent dates. The fair value of other equity interests is based on the net asset values provided by the underlying investment partnership. ASU 2015-7 removes the requirement to categorize within the fair value hierarchy all investments measured using the net asset value per share practical expedient and related disclosures. In addition, other assets and liabilities that are not financial instruments, such as premises and equipment, are not included in the disclosures.
Also, non-financial assets such as, among other things, the estimated earnings power of core deposits, the earnings potential of trust accounts, the trained workforce, and customer goodwill, which typically are not recognized on the balance sheet, may have value but are not included in the fair value disclosures.
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5. Secondary Market Mortgage Activities
Total loans serviced for others were $258.5 million and $264.5 million for the years ended December 31, 2023 and 2022, respectively.
The following summarizes secondary market mortgage activities for the years ended December 31, 2023, 2022, and 2021:

| December 31, 2023 |  | December 31, 2022 |  | December 31, 2021
Loans originated for resale | $ | 17,874 |  |  | $ | 34,181 |  |  | $ | 95,411 |
Proceeds from sales of loans held for sale | 16,263 |  |  | 29,151 |  |  | 97,179 |
Net gains on sales of loans held for sale | 447 |  |  | 1,285 |  |  | 2,737 |
Loan servicing fees | 744 |  |  | 781 |  |  | 720 |

The following summarizes activity for capitalized mortgage servicing rights for the years ended December 31, 2023, 2022, and 2021:

| December 31, 2023 |  | December 31, 2022 |  | December 31, 2021
Balance, beginning of year | $ | 1,804 |  |  | $ | 1,664 |  |  | $ | 1,527 |
Additions | 114 |  |  | 232 |  |  | 514 |
Servicing rights acquired | — |  |  | — |  |  | — |
Amortization | (364) |  |  | (92) |  |  | (377) |
Balance, end of year | $ | 1,554 |  |  | $ | 1,804 |  |  | $ | 1,664 |

The fair value of mortgage servicing rights is based on market prices for comparable mortgage servicing contracts, when available, or alternatively based on a valuation model that calculates the present value of estimated future net servicing income. The fair value of mortgage servicing rights was not materially different than amortized cost at December 31, 2023 and 2022, respectively. No valuation allowance was deemed necessary at December 31, 2023, 2022, and 2021. The fair value of interest rate lock commitments and forward commitments to sell loans were not material at December 31, 2023 or 2022.
6. Premises and Equipment
The following summarizes premises and equipment at December 31, 2023 and 2022:

| December 31, 2023 |  | December 31, 2022
Land | $ | 9,043 |  |  | $ | 8,534 |
Premises and leasehold improvements | 87,591 |  |  | 74,873 |
Furniture and equipment | 45,703 |  |  | 42,513 |
Construction in process | 2,047 |  |  | 7,582 |
| 144,384 |  |  | 133,502 |
Less: accumulated depreciation | 70,684 |  |  | 64,967 |
Premises and equipment, net | $ | 73,700 |  |  | $ | 68,535 |

Depreciation on premises and equipment amounted to $5.7 million in 2023, $5.3 million in 2022 and $5.3 million in 2021.
7. Leases
Operating lease assets represent the Corporation's right to use an underlying asset during the lease term and operating lease liabilities represent the Corporation's obligation to make lease payments arising from the lease. Operating lease assets and liabilities are recognized at lease commencement based on the present value of the remaining lease payments using a discount rate that represents the Corporation's incremental borrowing rate at the lease commencement date. Operating lease cost, which is comprised of amortization of the operating lease asset and the implicit interest accreted on the operating lease liability, is recognized on a straight-line basis over the lease term, and is recorded in net occupancy expense in the consolidated statements of income.
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The Corporation leases certain full-service branch offices, land and equipment. Leases with an initial term of twelve months or less are not recorded on the balance sheet. Most leases include one or more options to renew and the exercise of the lease renewal options are at the Corporation's sole discretion. The Corporation includes lease extension and termination options in the lease term if, after considering relevant economic factors, it is reasonably certain the Corporation will exercise the option. Certain lease agreements of the Corporation include rental payments adjusted periodically for changes in the consumer price index.

Leases |  | Classification |  | December 31, 2023 |  | December 31, 2022
Assets: |  |  |  |  |  |
Operating lease assets |  | Operating lease right-of-use assets |  | $ | 35,699 |  |  | $ | 32,307 |
Finance lease assets |  | Premises and equipment, net (1) |  | 215 |  |  | 286 |
Total leased assets |  |  |  | $ | 35,914 |  |  | $ | 32,593 |
Liabilities: |  |  |  |  |  |
Operating lease liabilities |  | Operating lease liabilities |  | $ | 37,650 |  |  | $ | 33,726 |
Finance lease liabilities |  | Accrued interest payable and other liabilities |  | 294 |  |  | 383 |
Total leased liabilities |  |  |  | $ | 37,944 |  |  | $ | 34,109 |

(1) Finance lease assets are recorded net of accumulated amortization of $1.0 million and $930 thousand as of December 31, 2023 and 2022, respectively.
The components of the Corporation's net lease expense for the years ended December 31, 2023, 2022, and 2021 were as follows:

Lease Cost |  | Classification |  |  |  | December 31, 2023 |  | December 31, 2022 |  | December 31, 2021
Operating lease cost |  | Net occupancy expense |  |  |  | $ | 2,963 |  |  | $ | 2,264 |  |  | $ | 1,801 |
Variable lease cost |  | Net occupancy expense |  |  |  | 92 |  |  | 59 |  |  | 55 |
Finance lease cost: |  |  |  |  |  |  |  |  |  |
Amortization of leased assets |  | Net occupancy expense |  |  |  | 72 |  |  | 72 |  |  | 72 |
Interest on lease liabilities |  | Interest expense - borrowed funds |  |  |  | 15 |  |  | 19 |  |  | 23 |
Sublease income (1) |  | Net occupancy expense |  |  |  | (93) |  |  | (79) |  |  | (71) |
Net lease cost |  |  |  |  |  | $ | 3,049 |  |  | $ | 2,335 |  |  | $ | 1,880 |

(1) Sublease income excludes rental income from owned properties.
The following table sets forth future minimum rental payments under noncancelable leases with terms in excess of one year as of December 31, 2023:

Maturity of Lease Liabilities as of December 31, 2023 |  | Operating Leases (1) |  | Finance Leases |  | Total
2024 |  | $ | 2,554 |  |  | $ | 105 |  |  | $ | 2,659 |
2025 |  | 2,579 |  |  | 105 |  |  | 2,684 |
2026 |  | 2,567 |  |  | 105 |  |  | 2,672 |
2027 |  | 2,543 |  |  | — |  |  | 2,543 |
2028 |  | 2,563 |  |  | — |  |  | 2,563 |
After 2028 |  | 47,677 |  |  | — |  |  | 47,677 |
Total lease payments |  | 60,483 |  |  | 315 |  |  | 60,798 |
Less: Interest |  | 22,833 |  |  | 21 |  |  | 22,854 |
Present value of lease liabilities |  | $ | 37,650 |  |  | $ | 294 |  |  | $ | 37,944 |

(1) Operating lease payments include payments related to options to extend lease terms that are reasonably certain of being exercised and exclude $8.2 million of legally binding minimum lease payments for leases signed, but not yet commenced.
Other information related to the Corporation's lease liabilities as of December 31, 2023 and 2022 was as follows:

Lease Term and Discount Rate |  | December 31, 2023 |  | December 31, 2022
Weighted-average remaining lease term (years) |  |  |  |
Operating leases |  | 23.0 |  | 23.9
Finance leases |  | 3.0 |  | 4.0
Weighted-average discount rate |  |  |  |
Operating leases |  | 4.05 | % |  | 3.83 | %
Finance leases |  | 4.49 | % |  | 4.49 | %

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Other information related to the Corporation's lease liabilities as of December 31, 2023 and 2022 was as follows:

Other Information |  | December 31, 2023 |  | December 31, 2022
Cash paid for amounts included in the measurement of lease liabilities |  |  |  |
Operating cash flows used by operating leases |  | $ | 1,134 |  |  | $ | 1,183 |

8. Goodwill and Intangible Assets
Goodwill
The change in the carrying amount of goodwill for the years ended December 31, 2023 and 2022 was as follows:

| December 31, 2023 |  | December 31, 2022
Balance, beginning of year | $ | 43,749 |  |  | $ | 43,749 |
Acquired during the year | — |  |  | — |
Balance, end of year | $ | 43,749 |  |  | $ | 43,749 |

Impairment exists when the carrying value of goodwill exceeds its fair value. The Corporation completed its annual goodwill impairment test as of December 31, 2022 and concluded that no impairment charges were required as of that date. During the fourth quarter of 2023, the Corporation elected to change the timing of its annual goodwill impairment test from December 31 to November 30. The selection of November 30 as the annual testing date for the impairment of goodwill is intended to move the testing to a time period outside of the Corporation's annual financial reporting process to allow the Corporation additional time to complete the analysis. The Corporation believes that this change is preferable under the circumstances, and that this change does not accelerate, delay or avoid an impairment charge. The Corporation has also determined that a change in the annual testing date did not result in adjustments to the consolidated financial statements when applied retrospectively.
At November 30, 2023, the Corporation elected to perform a quantitative assessment to determine if it was more likely than not that the fair value exceeded its carrying value, including goodwill. The Corporation engaged a third party valuation firm to assist in performing the quantitative analysis using multiple approaches, reflecting assumptions that were provided and weighted by management. The primary methodology used was the discounted cash flow approach while also considering a market approach of comparing the multiples of the Corporation to multiples of similar public companies and market price with control premiums. In addition, the value relied upon projections and growth rates prepared by management. Based upon the valuation prepared, the quantitative assessment indicated that it was more likely than not that the fair value exceeded its carrying value, resulting in no impairment.
Intangible Assets
In connection with its acquisition of Bank of Akron in 2020, the Corporation recorded a core deposit intangible asset of $613 thousand. During the year ended December 31, 2023, 2022, and 2021, the Corporation recorded amortization expense of $84 thousand, $96 thousand, and $107 thousand, respectively. The net carrying value at December 31, 2023 and 2022 was $280 thousand and $364 thousand, respectively. No other intangible assets were required to be recorded in connection with the acquisition of Bank of Akron.
Estimated amortization expense of core deposit intangible assets for each of the next five years is as follows:

2024 | $ | 73 |
2025 | 62 |
2026 | 51 |
2027 | 40 |
2028 | 29 |
Thereafter | 25 |
Total | $ | 280 |

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In connection with the formation of Ridge View Bank, a division of the Bank, the Corporation recorded an intangible asset related to naming rights in 2023. The naming rights have an indefinite useful life. The Corporation does not amortize intangible assets with indefinite lives but assesses them for impairment annually or more frequently if events or changes in circumstances indicate potential impairment.
As of December 31, 2023, the carrying amount of naming rights intangible assets was $125 thousand and no impairment indicators were identified during the year ended December 31, 2023.
Management evaluates events or changes in circumstances that may impact the indefinite useful life assessment of the naming rights intangible asset. If impairment indicators are identified, the Corporation will perform a qualitative or quantitative impairment test, as applicable.
9. Deposits
The following table reflects time certificates of deposit accounts included in total deposits and their remaining maturities at December 31, 2023:

Time deposits maturing: |
2024 | $ | 405,920 |
2025 | 80,856 |
2026 | 8,671 |
2027 | 6,472 |
2028 | 2,865 |
Thereafter | 1,710 |
Total | $ | 506,494 |

Certificates of deposit of $250 thousand or more totaled $100.2 million and $135.4 million at December 31, 2023 and 2022, respectively.
The Corporation had $208.3 million in brokered deposits as of December 31, 2023 compared to $24.1 million at December 31, 2022. In addition, the Corporation had $739.3 million and $4.6 million in reciprocal deposits at December 31, 2023 and December 31, 2022, respectively.
10. Borrowings
At December 31, 2023 and 2022, the Corporation had available one $10 million unsecured line of credit with an unaffiliated institution. Borrowings under the line of credit bear interest at a variable rate equal to the Secured Overnight Finance Rate ("SOFR") plus 2.85%. There were no borrowings on the line of credit at December 31, 2023 and 2022.
FHLB Borrowings
The Bank has the ability to borrow funds from the FHLB. The Bank maintains a $250.0 million line-of-credit (Open Repo Plus) with the FHLB which is a revolving term commitment available on an overnight basis. The term of this commitment may not exceed 364 days and it reprices daily at market rates. Under terms of a blanket collateral agreement with the FHLB, the line-of-credit and long term advances are secured by FHLB stock and the Bank pledges its single-family residential mortgage loan portfolio, certain commercial real estate loans, and certain agriculture real estate loans as security for any advances.
Total loans pledged to the FHLB at December 31, 2023 and 2022, were $1.8 billion and $1.6 billion, respectively. The Bank could obtain advances of up to approximately $993.8 million from the FHLB at December 31, 2023 and $757.8 million at December 31, 2022.
At December 31, 2023 and December 31, 2022, outstanding advances from the FHLB were as follows:

|  | 2023 |  | 2022
Open Repo borrowing at an interest rate of 5.68% and 4.45% at December 31, 2023 and December 31, 2022. The maximum amount of the Open Repo borrowing available is $250,000. |  | $ | — |  |  | $ | 132,396 |
Total |  | $ | — |  |  | $ | 132,396 |

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At December 31, 2023 and 2022, municipal deposit letters of credit issued by the FHLB on behalf of the Bank naming applicable municipalities as beneficiaries were $155.7 million and $75.5 million, respectively. The letters of credit were utilized in place of securities pledged to the municipalities for their deposits maintained at the Bank.
Federal Reserve Borrowings
In June 2023, the Bank was approved by the Federal Reserve Bank of Philadelphia (the "Federal Reserve") for its Borrower-in-Custody ("BIC") program. At December 31, 2023, the Bank had borrowing capacity through the Federal Reserve BIC program of $255.5 million. Borrowings under the BIC program are overnight advances with interest chargeable at the discount window ("primary credit") borrowing rate. At December 31, 2023, the Bank has pledged certain qualifying loans with an unpaid principal balance of $282.7 million and securities with a carrying value of $78.5 million as collateral.
Other Borrowings
At December 31, 2023 and 2022, the Bank had no outstanding borrowings from unaffiliated institutions under overnight borrowing agreements.
Subordinated Debentures
In 2007, the Corporation issued two $10.0 million floating rate trust preferred securities as part of a pooled offering of such securities. The interest rate on each offering was determined quarterly and floated based on the three-month LIBOR plus 1.55%. Effective September 15, 2023, the interest rate calculation method was revised. The interest rate is now determined quarterly, and floats based on the three-month SOFR plus a credit spread adjustment of 0.26161% plus 1.55%. This change reflects the transition from LIBOR to SOFR as the reference rate. The all-in rate was 7.20% at December 31, 2023 and 6.32% at December 31, 2022. The Corporation issued subordinated debentures to the trusts in exchange for the proceeds of the offerings, which debentures represent the sole assets of the trusts. The subordinated debentures must be redeemed no later than 2037. The Corporation may redeem the debentures, in whole or in part, at face value at any time. The Corporation has the option to defer interest payments from time to time for a period not to exceed five consecutive years. Although the trusts are variable interest entities, the Corporation is not the primary beneficiary. As a result, because the trusts are not consolidated with the Corporation, the Corporation does not report the securities issued by the trusts as liabilities. Instead, the Corporation reports as liabilities the subordinated debentures issued by the Corporation and held by the trusts, since the liabilities are not eliminated in consolidation. The trust preferred securities were designated to qualify as Tier 1 capital under the Federal Reserve’s capital guidelines.
Subordinated Notes
In June 2021, the Corporation sold $85.0 million aggregate principal amount of its fixed-to-floating rate subordinated notes to eligible purchasers in a private offering in reliance on the exemption from the registration requirements of Section 4(a)(2) of the Securities Act and the provisions of Rule 506 of Regulation D thereunder. The notes will mature in June 2031, and initially bear interest at a fixed rate of 3.25% per annum, payable semi-annually in arrears, to, but excluding, June 15, 2026, and thereafter to, but excluding, the maturity date or earlier redemption, the interest rate will reset quarterly to an interest rate per annum equal to the then current three-month average SOFR plus 2.58%. The net proceeds from the sale were approximately $83.5 million, after deducting offering expenses. These subordinated notes were designed to qualify as Tier 2 capital under the Federal Reserve’s capital guidelines and were given an investment grade rating of BBB- by Kroll Bond Rating Agency. The unamortized debt issuance costs were $0.7 million and $1.0 million as of December 31, 2023 and December 31, 2022, respectively.
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11. Employee Benefit Plans
The Corporation sponsors a contributory defined contribution Section 401(k) plan. The plan permits eligible employees to make pre-tax and Roth contributions up to 70% of salary. Employees 21 years of age or over with a minimum of 90 days of service are eligible for matching contributions by the Corporation at 100% for every 1% contributed up to 3% then 50% for every 1% contributed up to the next 2% in total of the employee’s compensation. The Corporation’s matching contribution and related expenses were $1.8 million, $1.6 million and $1.2 million for the years ended December 31, 2023, 2022, and 2021, respectively. A profit sharing discretionary non-contributory pension plan component is in place for employees 21 years of age or over with a minimum of one-year with 1,000 hours of service and allows employer contributions in an amount equal to a percentage of eligible compensation plus 5.7% of the compensation in excess of $160 thousand, subject to a $330 thousand salary limit. The Corporation recognized profit sharing expense of $3.6 million, $2.9 million and $2.0 million for the year ended December 31, 2023, 2022, and 2021 respectively.
The Corporation has adopted a non-qualified supplemental executive retirement plan ("SERP") for certain executives to compensate those executive participants in the Corporation’s retirement plan whose benefits are limited by compensation limitations under current tax law. The SERP is considered an unfunded plan for tax and ERISA purposes and all obligations arising under the SERP are payable from the general assets of the Corporation. At December 31, 2023 and 2022, obligations of $10.0 million and $9.7 million, respectively, were included in other liabilities for this plan. Expenses related to this plan were $565 thousand for the year ended December 31, 2023, $1.3 million for the year ended December 31, 2022, and $2.1 million for the year ended December 31, 2021.
The Corporation has established a Survivor Benefit Plan for the benefit of outside directors. The purpose of the plan is to provide life insurance benefits to beneficiaries of the Corporation’s directors who at the time of their death are participants in the plan. The plan is considered an unfunded plan for tax and ERISA purposes and all obligations arising under the plan are payable from the general assets of the Corporation. At December 31, 2023 and 2022, obligations of $1.3 million and $1.6 million, respectively, were included in other liabilities for this plan. Expenses (benefits) related to this plan were $(213) thousand for the year ended December 31, 2023, $81 thousand for the year ended December 31, 2022 and $196 thousand for the year ended December 31, 2021.
On December 31, 2021, the Corporation adopted a Defined Contribution Plan for several employees (the "Plan"), pursuant to which the Corporation will make certain annual contributions to the Plan on the employee's behalf, which will be paid to the employee following their termination of employment from the Corporation or, if earlier, upon the employee becoming disabled. The Plan became effective as of January 2, 2022.
12. Deferred Compensation Plans
Deferred compensation plans cover all directors and certain officers. Under the plans, the Corporation pays each participant, or their beneficiary, the value of the participant’s account over a maximum period of 10 years, beginning with the individual’s termination of service. A liability is accrued for the obligation under these plans.
A summary of changes in the deferred compensation plan liability follows:

| December 31, 2023 |  | December 31, 2022 |  | December 31, 2021
Balance, beginning of year | $ | 3,650 |  |  | $ | 3,675 |  |  | $ | 3,085 |
Deferrals, dividends, and changes in fair value | 638 |  |  | (2) |  |  | 1,084 |
Deferred compensation payments | (180) |  |  | (23) |  |  | (494) |
Balance, end of year | $ | 4,108 |  |  | $ | 3,650 |  |  | $ | 3,675 |

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13. Income Taxes
The following is a summary of income tax expense for the years ended December 31, 2023, 2022, and 2021:

| December 31, 2023 |  | December 31, 2022 |  | December 31, 2021
Current – federal | $ | 11,446 |  |  | $ | 15,494 |  |  | $ | 13,494 |
Current – state | 1,252 |  |  | 1,346 |  |  | 1,268 |
Deferred – federal | 1,110 |  |  | (1,618) |  |  | (1,025) |
Deferred – state | 1 |  |  | (196) |  |  | (666) |
Income tax expense | $ | 13,809 |  |  | $ | 15,026 |  |  | $ | 13,071 |

The reconciliation of income tax attributable to pre-tax income at the federal statutory tax rates to income tax expense is as follows:

| December 31, 2023 |  | % |  | December 31, 2022 |  | % |  | December 31, 2021 |  | %
Tax at statutory rate | $ | 15,084 |  |  | 21.0 | % |  | $ | 16,425 |  |  | 21.0 | % |  | $ | 14,863 |  |  | 21.0 | %
Tax exempt income, net | (1,090) |  |  | (1.5) |  |  | (1,036) |  |  | (1.3) |  |  | (1,016) |  |  | (1.4) |
Bank owned life insurance | (619) |  |  | (0.9) |  |  | (721) |  |  | (0.9) |  |  | (554) |  |  | (0.8) |
Tax credits, net of amortization | (173) |  |  | (0.3) |  |  | (193) |  |  | (0.3) |  |  | (215) |  |  | (0.3) |
Effect of state tax | 990 |  |  | 1.4 |  |  | 908 |  |  | 1.2 |  |  | 476 |  |  | 0.7 |
Other | (383) |  |  | (0.5) |  |  | (357) |  |  | (0.5) |  |  | (483) |  |  | (0.7) |
Income tax expense | $ | 13,809 |  |  | 19.2 | % |  | $ | 15,026 |  |  | 19.2 | % |  | $ | 13,071 |  |  | 18.5 | %

The following table sets forth deferred taxes as of December 31, 2023 and 2022:

| December 31, 2023 |  | December 31, 2022
Deferred tax assets: |  |  |
Allowance for credit losses | $ | 10,515 |  |  | $ | 9,154 |
Fair value adjustments – business combination | 771 |  |  | 917 |
Deferred compensation | 3,693 |  |  | 3,448 |
Net operating loss carryover | 516 |  |  | 344 |
Post-retirement benefits | 605 |  |  | 647 |
Unrealized loss on equity securities | 129 |  |  | — |
Nonaccrual loan interest | 476 |  |  | 348 |
Accrued expenses | 579 |  |  | 2,300 |
Deferred fees and costs | 557 |  |  | 997 |
Unrealized loss on securities available-for-sale | 11,308 |  |  | 12,914 |
Unrealized loss on securities held-to-maturity | 1,108 |  |  | 1,265 |
Operating lease liability | 8,509 |  |  | 7,645 |
Other | 453 |  |  | 671 |
| 39,219 |  |  | 40,650 |
Deferred tax liabilities: |  |  |
Premises and equipment | 3,761 |  |  | 3,409 |
Unrealized gain on equity securities | — |  |  | 119 |
Intangibles – section 197 | 2,487 |  |  | 2,492 |
Mortgage servicing rights | 345 |  |  | 399 |
Unrealized gain on interest rate swap | — |  |  | 32 |
Operating lease asset | 8,128 |  |  | 7,397 |
Other | 571 |  |  | 68 |
| 15,292 |  |  | 13,916 |
Net deferred tax asset | $ | 23,927 |  |  | $ | 26,734 |

At December 31, 2023 and 2022, the Corporation had no unrecognized tax benefits. The Corporation does not expect the total amount of unrecognized tax benefits to significantly increase in the next twelve months.
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At December 31, 2023, the Corporation had state net operating loss carryforwards of $15.2 million related to the acquisition of Bank of Akron, which will expire at various dates from 2034 to 2039. The Corporation's ability to utilize carryforwards is limited to $363 thousand per year. Due to this limitation, management has determined it is more likely than not that approximately $9.5 million of net operating loss carryforwards will expire unutilized.
The Corporation recognizes interest and/or penalties related to income tax matters as part of income tax expense. At December 31, 2023, 2022, and 2021, there were no amounts accrued for interest and/or penalties and no amounts recorded as expense for the years ending December 31, 2023, 2022, and 2021.
The Corporation and its subsidiaries are subject to U.S. federal income tax, as well as filing various state returns. The Corporation is no longer subject to U.S. federal income tax examinations by the taxing authorities for years prior to 2020. Tax years 2020 through 2023 are open to examination.
14. Related Party Transactions
Loans to principal officers, directors, and their affiliates during 2023 were as follows:

Beginning balance | $ | 44,998 |
New loans and advances | 2,716 |
Effect of changes in composition of related parties | 462 |
Repayments | (8,047) |
Ending balance | $ | 40,129 |

Deposits from principal officers, directors, and their affiliates were $11.4 million and $13.7 million at December 31, 2023 and 2022, respectively.
15. Stock-Based Compensation
The Corporation has a stock incentive plan, which is administered by a committee of the Board of Directors and which permits the Corporation to provide various types of stock-based compensation to its key employees, directors, and/or consultants, including time-based and performance-based shares of restricted stock. The Corporation previously maintained the CNB Financial Corporation 2009 Stock Incentive Plan, which terminated in accordance with its terms on February 10, 2019, and currently maintains the CNB Financial Corporation 2019 Omnibus Incentive Plan (the "2019 Stock Incentive Plan"), which was approved by the Corporation’s shareholders and became effective on April 16, 2019.
The 2019 Stock Incentive Plan provides for up to 507,671 shares of common stock to be awarded in the form of nonqualified options or restricted stock. For key employees, the vesting of time-based restricted stock is one-third, one-fourth, or one-fifth of the granted restricted shares per year, beginning one year after the grant date, with 100% vesting on the third, fourth or fifth anniversary of the grant date, respectively. Prior to 2018, for non-employee directors, the vesting schedule was one-third of the granted restricted shares per year, beginning one year after the grant date, with 100% vested on the third anniversary of the grant date. Beginning in 2018, stock compensation received by non-employee directors vests immediately. All stock-based compensation grants during the years ending December 31, 2023, 2022, and 2021 and outstanding at December 31, 2023, 2022 and 2021 were time-based and performance-based restricted stock.
During the years ended December 31, 2023, 2022, and 2021, the Executive Compensation and Personnel Committee of the Corporation's Board of Directors granted a total of 105,185, 57,823, and 55,218 shares, respectively, of time-based restricted common stock to certain key employees and all independent directors of the Corporation.
Compensation expense for the restricted stock awards is recognized over the requisite service period based on the fair value of the shares at the date of grant on a straight-line basis. Non-vested restricted stock awards are recorded as a reduction of additional paid-in-capital in shareholders’ equity until earned. Compensation expense resulting from time-based, performance-based and director restricted stock awards was $1.7 million, $1.2 million and $1.4 million for the years ended December 31, 2023, 2022, and 2021, respectively. The total income tax benefit related to the recognized compensation cost of vested restricted stock awards was $354 thousand, $262 thousand, and $296 thousand for the years ended December 31, 2023, 2022 and 2021, respectively.
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A summary of changes in time-based unvested restricted stock awards follows:

| Shares |  | Weighted-average Grant Date Fair Value
Non-vested at January 1, 2023 | 69,746 |  |  | $ | 25.21 |
Granted | 90,675 |  |  | 23.63 |
Forfeited | (6,391) |  |  | 24.34 |
Vested | (29,096) |  |  | 25.28 |
Non-vested at December 31, 2023 | 124,934 |  |  | $ | 24.09 |

The above table excludes 14,510 shares in restricted stock awards that were granted to the Corporation’s Board of Directors at a weighted average fair value of $24.12 and immediately vested. As of December 31, 2023 and 2022, there was $2.1 million and $1.2 million, respectively, of total unrecognized compensation cost related to non-vested shares granted under the 2019 Stock Incentive Plan. The fair value of shares vesting during the year end December 31, 2023, 2022, and 2021 was $1.0 million, $1.4 million and $835 thousand, respectively.
In addition to the time-based restricted stock disclosed above, the Corporation’s Board of Directors grants performance-based restricted stock awards ("PBRSAs") to key employees. The number of PBRSAs will depend on certain performance conditions earned over a three year period and are also subject to service-based vesting. Awards with a maximum of 23,124 shares, 13,761 shares, and 18,210 shares in aggregate were granted to key employees in 2023, 2022, and 2021, respectively.
Total compensation expense related to the PBRSAs and included in the above compensation expense total was $235 thousand, $91 thousand and $378 thousand for 2023, 2022, and 2021. Estimated remaining unearned compensation related to PBRSAs at December 31, 2023 was $442 thousand.
In 2022, the 2020 PBRSAs were fully earned and in 2023, 4,118 shares were fully distributed. The fair value of the 4,118 shares distributed in 2023 was $99 thousand. In 2021, the 2019 PBRSAs were fully earned and in 2022, 11,895 shares were fully distributed. The fair value of the 11,895 shares distributed in 2022 was $318 thousand.
The number of authorized stock-based awards still available for grant as of December 31, 2023 was 165,165.
16. Regulatory Capital Matters
Banks and financial holding companies are subject to regulatory capital requirements administered by federal banking agencies. Capital adequacy guidelines and, for the Bank, prompt corrective action ("PCA") regulations involve quantitative measures of assets, liabilities, and certain off-balance sheet items calculated under regulatory accounting practices. Capital amounts and classifications are also subject to qualitative judgments by regulators. Failure to meet capital requirements can result in regulatory enforcement actions. The net unrealized gain or loss on AFS debt securities is excluded from computing regulatory capital. Management believes as of December 31, 2023 the Corporation and the Bank meet all capital adequacy requirements to which they are subject.
The PCA regulations provide five classifications: well capitalized, adequately capitalized, undercapitalized, significantly undercapitalized, and critically undercapitalized, although these terms alone do not represent overall financial condition. If adequately capitalized, regulatory approval is required to accept brokered deposits. If undercapitalized, capital distributions are limited, as is asset growth and expansion; brokered deposits may not be accepted, renewed or rolled over; and capital restoration plans are required. As of December 31, 2023 and 2022, the most recent regulatory notifications categorized the Bank as well capitalized under the PCA. There are no events or conditions since this notification that management believes have changed the Bank’s capital category.
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Actual and required capital amounts and ratios are presented below as of December 31, 2023 and 2022. The capital adequacy ratio includes the capital conservation buffer.

| Actual |  | For Capital Adequacy Purposes (1) |  | To Be Well Capitalized Under Prompt Corrective Action Provisions
| Amount |  | Ratio |  | Amount |  | Ratio |  | Amount |  | Ratio
December 31, 2023 |  |  |  |  |  |  |  |  |  |  |
Total Capital to Risk Weighted Assets |  |  |  |  |  |  |  |  |  |  |
Consolidated | $ | 725,091 |  |  | 15.99 | % |  | $ | 476,235 |  |  | 10.50 | % |  | N/A |  | N/A
Bank | 603,409 |  |  | 13.36 |  |  | 474,339 |  |  | 10.50 |  |  | $ | 451,751 |  |  | 10.00 | %
Tier 1 (Core) Capital to Risk Weighted Assets |  |  |  |  |  |  |  |  |  |  |
Consolidated | 598,785 |  |  | 13.20 |  |  | 385,523 |  |  | 8.50 |  |  | N/A |  | N/A
Bank | 563,412 |  |  | 12.47 |  |  | 383,989 |  |  | 8.50 |  |  | 361,401 |  |  | 8.00 |
Common equity Tier 1 to Risk Weighted Assets |  |  |  |  |  |  |  |  |  |  |
Consolidated | 521,000 |  |  | 11.49 |  |  | 317,490 |  |  | 7.00 |  |  | N/A |  | N/A
Bank | 556,033 |  |  | 12.31 |  |  | 316,226 |  |  | 7.00 |  |  | 293,638 |  |  | 6.50 |
Tier 1 (Core) Capital to Average Assets |  |  |  |  |  |  |  |  |  |  |
Consolidated | 598,785 |  |  | 10.54 |  |  | 227,231 |  |  | 4.00 |  |  | N/A |  | N/A
Bank | 563,412 |  |  | 9.86 |  |  | 228,573 |  |  | 4.00 |  |  | 285,716 |  |  | 5.00 |
December 31, 2022 |  |  |  |  |  |  |  |  |  |  |
Total Capital to Risk Weighted Assets |  |  |  |  |  |  |  |  |  |  |
Consolidated | $ | 688,164 |  |  | 16.08 | % |  | $ | 449,370 |  |  | 10.50 | % |  | N/A |  | N/A
Bank | 525,048 |  |  | 12.32 |  |  | 447,436 |  |  | 10.50 |  |  | $ | 426,130 |  |  | 10.00 | %
Tier 1 (Core) Capital to Risk Weighted Assets |  |  |  |  |  |  |  |  |  |  |
Consolidated | 566,454 |  |  | 13.24 |  |  | 363,776 |  |  | 8.50 |  |  | N/A |  | N/A
Bank | 489,374 |  |  | 11.48 |  |  | 362,210 |  |  | 8.50 |  |  | 340,904 |  |  | 8.00 |
Common equity Tier 1 to Risk Weighted Assets |  |  |  |  |  |  |  |  |  |  |
Consolidated | 488,669 |  |  | 11.42 |  |  | 299,580 |  |  | 7.00 |  |  | N/A |  | N/A
Bank | 481,995 |  |  | 11.31 |  |  | 298,291 |  |  | 7.00 |  |  | 276,984 |  |  | 6.50 |
Tier 1 (Core) Capital to Average Assets |  |  |  |  |  |  |  |  |  |  |
Consolidated | 566,454 |  |  | 10.74 |  |  | 210,988 |  |  | 4.00 |  |  | N/A |  | N/A
Bank | 489,374 |  |  | 9.22 |  |  | 212,283 |  |  | 4.00 |  |  | 265,354 |  |  | 5.00 |

(1) The minimum amounts and ratios as of December 31, 2023 and 2022 include the full phase in of the capital conservation buffer of 2.5 percent required by the Basel III framework.
Certain restrictions exist regarding the ability of the Bank to transfer funds to the Corporation in the form of cash dividends, loans or advances. During 2023, $421.5 million of accumulated net earnings of the Bank included in consolidated shareholders’ equity, plus any 2024 net profits retained to the date of the dividend declared, is available for distribution to the Corporation as dividends without prior regulatory approval, subject to regulatory capital requirements described above.
17. Derivative Instruments
On September 7, 2018, the Corporation executed an interest rate swap agreement with a 5-year term and an effective date of September 15, 2018 in order to hedge cash flows associated with $10.0 million of a subordinated note that was issued by the Corporation during 2007 and elected cash flow hedge accounting for the agreement. The Corporation’s objective in using this derivative is to add stability to interest expense and to manage its exposure to interest rate risk. The interest rate swap involves the receipt of variable-rate amounts in exchange for fixed-rate payments from September 15, 2018 to September 15, 2023 without the exchange of the underlying notional amount. The swap that expired on September 15, 2023 was not renewed.
As of December 31, 2023 and 2022, no derivatives were designated as fair value hedges or hedges of net investments in foreign operations. Additionally, the Corporation does not use derivatives for trading or speculative purposes and currently does not have any derivatives that are not designated as hedges.
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The following tables provide information about the amounts and locations of activity related to the interest rate swaps designated as cash flow hedges within the Corporation’s consolidated balance sheet and statement of income as of December 31, 2023 and 2022 and for the years ended December 31, 2023, 2022, and 2021:

| Liability Derivative |  |  |
| Balance Sheet | Fair value |  |  |
| Location | December 31, 2023 | December 31, 2022 |  |  |
Interest rate contract | Accrued interest receivable (payable) and other assets (liabilities) | $— | $150 |  |  |
For the Year Ended December 31, 2023 | (a) | (b) |  | (c) | (d) | (e)
Interest rate contract | $(119) | Interest expense – subordinated debentures | $151 | Other income | $—
For the Year Ended December 31, 2022 |  |  |  |  |  |
Interest rate contract | 425 | Interest expense – subordinated debentures | (127) | Other income | —
For the Year Ended December 31, 2021 |  |  |  |  |  |
Interest rate contract | 301 | Interest expense – subordinated debentures | (276) | Other income | —

(a)Amount of Gain or (Loss) Recognized in Other Comprehensive Loss on Derivative (Effective Portion), net of tax
(b)Location of Gain or (Loss) Reclassified from Accumulated Other Comprehensive Loss into Income (Effective Portion)
(c)Amount of Loss Reclassified from Accumulated Other Comprehensive Loss into Income (Effective Portion)
(d)Location of Gain or (Loss) Recognized in Income on Derivative (Ineffective Portion and Amount Excluded from Effectiveness Testing)
(e)Amount of Gain or (Loss) Recognized in Income on Derivative (Ineffective Portion and Amount Excluded from Effectiveness Testing)
As of December 31, 2023 and 2022, a cash collateral balance of zero and $200 thousand, respectively, was maintained with the counterparty to the interest rate swaps. These balances are included in interest bearing deposits with other banks on the consolidated balance sheets.
The Corporation entered into certain interest rate swap contracts that are not designated as hedging instruments. These derivative contracts relate to transactions in which the Corporation enters into an interest rate swap with a customer while at the same time entering into an offsetting interest rate swap with another financial institution. In connection with each swap transaction, the Corporation agrees to pay interest to the customer on a notional amount at a variable interest rate and receive interest from the customer on a similar notional amount at a fixed interest rate. Concurrently, the Corporation agrees to pay another financial institution the same fixed interest rate on the same notional amount and receive the same variable interest rate on the same notional amount. The transaction allows the Corporation’s customers to effectively convert a variable rate loan to a fixed rate. Because the Corporation acts as an intermediary for its customer, changes in the fair value of the underlying derivative contracts offset each other and do not impact the Corporation’s results of operations.
The Corporation pledged cash collateral to another financial institution with a balance $173 thousand as of December 31, 2023 and $173 thousand as of December 31, 2022. This balance is included in cash and due from banks on the consolidated balance sheets. The Corporation may require its customers to post cash or securities as collateral on its program of back-to-back swaps depending upon the specific facts and circumstances surrounding each loan and individual swap. In addition, certain language is included in the International Swaps and Derivatives Association agreement and loan documents where, in default situations, the Corporation is permitted to access collateral supporting the loan relationship to recover any losses suffered on the derivative asset or liability. The Corporation may be required to post additional collateral to swap counterparties in the future in proportion to potential increases in unrealized loss positions. Effective on September 30, 2023, the Corporation amended all of the back-to-back swap contracts to reference the 1-month SOFR plus a credit spread adjustment of 11.448 basis points "Fallback SOFR."
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The following table provides information about the amounts and locations of activity related to the back-to-back interest rate swaps within the Corporation’s consolidated balance sheet as of December 31, 2023 and 2022:

| Current Notional Amount |  | Average Maturity (in years) |  | Weighted Average Fixed Rate |  | Weighted Average Variable Rate |  | Fair Value |  |
December 31, 2023 |  |  |  |  |  |  |  |  |  |  |
3 rd Party interest rate swaps | $ | 21,302 |  |  | 4.9 |  | 4.19 | % |  | 1 month Fallback SOFR + 1.79% |  | $ | 1,013 |  |  | (a)
Customer interest rate swaps | (21,302) |  |  | 4.9 |  | 4.19 | % |  | 1 month Fallback SOFR + 1.79% |  | (1,013) |  |  | (b)
December 31, 2022 |  |  |  |  |  |  |  |  |  |  |
3 rd Party interest rate swaps | $ | 31,417 |  |  | 4.9 |  | 4.12 | % |  | 1 month LIBOR + 1.68% |  | $ | 1,700 |  |  | (a)
Customer interest rate swaps | (31,417) |  |  | 4.9 |  | 4.12 | % |  | 1 month LIBOR + 1.68% |  | (1,700) |  |  | (b)

(a)Reported in accrued interest receivable and other assets within the consolidated balance sheets
(b)Reported in accrued interest payable and other liabilities within the consolidated balance sheets
Risk Participation Agreements
The Corporation entered into Risk Participation Agreement ("RPA") swaps with other financial institution related to loans in which the Corporation is a participant. The RPAs provide credit protection to the financial institutions should the borrower fail to perform on its interest rate derivative contracts with the financial institutions. The notional amounts of these contingent agreements total $21.7 million as of December 31, 2023, and zero as of December 31, 2022.
18. Off-Balance Sheet Commitments and Contingencies
The Corporation is a party to financial instruments with off-balance sheet risk in the normal course of business to meet the financial needs of its customers. These financial instruments include commitments to extend credit and standby letters of credit. Those instruments involve, to varying degrees, elements of credit and interest rate risk in excess of the amount recognized in the consolidated balance sheets. The Corporation's exposure to credit loss in the event of nonperformance by the other party of the financial instrument for commitments to extend credit and standby letters of credit is represented by the contract or notional amount of those instruments. The Corporation uses the same credit policies for underwriting all loans, including these commitments and conditional obligations.
As of December 31, 2023 and 2022, the Corporation did not own or trade other financial instruments with significant off-balance sheet risk including derivatives such as futures, forwards, option contracts and the like, although such instruments may be appropriate to use in the future to manage interest rate risk. See Note 17, “Derivative Instruments,” for a description of interest rate derivatives entered into by the Corporation.
Standby letters of credit are conditional commitments issued by the Corporation to guarantee the performance of a customer to a third party. The contract or notional amount of these instruments reflects the maximum amount of future payments that the Corporation could be required to pay under the guarantees if there were a total default by the guaranteed parties, without consideration for possible recoveries under recourse provisions or from collateral held or pledged. In addition, many of these commitments are expected to expire without being drawn upon; therefore, the total commitment amounts do not necessarily represent future cash requirements.
The Corporation's maximum obligation to extend credit for loan commitments (unfunded loans and unused lines of credit) and standby letters of credit outstanding as of December 31, 2023 and 2022 were as follows:

| December 31, 2023 |  | December 31, 2022
| Fixed Rate |  | Variable Rate |  | Fixed Rate |  | Variable Rate
Commitments to make loans | $ | 111,526 |  |  | $ | 370,437 |  |  | $ | 126,594 |  |  | $ | 441,008 |
Unused lines of credit | 11,219 |  |  | 789,534 |  |  | 7,444 |  |  | 725,277 |
Standby letters of credit | 18,649 |  |  | 2,480 |  |  | 16,124 |  |  | 1,603 |

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Commitments to extend credit are agreements to lend to a customer as long as there is no violation of any condition established in the contract. Commitments generally have fixed expiration dates or other termination clauses and may require payment of a fee. Since many of the commitments are expected to expire without being drawn upon, the total commitment amounts do not necessarily represent future cash requirements. The Corporation evaluates each customer’s creditworthiness on a case-by-case basis. The amount of collateral obtained, if deemed necessary by the Corporation upon extension of credit, is based on management’s credit evaluation of the counterparty. Collateral that is held varies but may include securities, accounts receivable, inventory, property, plant and equipment, and residential and income-producing commercial properties.
Allowance for Credit Losses on Unfunded Loan Commitments
The Corporation maintains an allowance for credit losses on unfunded commercial lending commitments and letters of credit to provide for the risk of loss inherent in these arrangements. The allowance is computed using a methodology similar to that used to determine the allowance for credit losses for loans receivable, modified to take into account the probability of a draw-down on the commitment. The provision for credit losses on unfunded loan commitments is included in the provision for credit losses on the Corporation's consolidated statements of income. The allowance for unfunded commitments is included in other liabilities in the consolidated balance sheets. Note 3, "Loans Receivable and Allowance for Credit Losses," in the consolidated financial statements provides more detail concerning the provision for credit losses related to the loan portfolio of the Corporation.
The following table presents activity in the allowance for credit losses on unfunded loan commitments for the years ended December 31, 2023, 2022, and 2021, respectively:

|  |  | Year ended December 31,
|  |  |  |  | 2023 |  | 2022 |  | 2021
Beginning balance |  |  |  |  | $ | 603 |  |  | $ | — |  |  | $ | — |
Provision for credit losses on unfunded loan commitments (1) |  |  |  |  | 156 |  |  | 603 |  |  | — |
Ending balance |  |  |  |  | $ | 759 |  |  | $ | 603 |  |  | $ | — |

(1) Excludes provision for credit losses related to the loan portfolio.
Other Off-Balance Sheet Commitments
The Corporation makes investments in limited partnerships, including certain small business investment corporations and low income housing partnerships. Capital contributions for investments in small business companies ("SBIC") and other limited partnerships, reported in FHLB and other restricted stock holdings and investments on the consolidated balance sheet, as of December 31, 2023 and 2022, were $21.7 million and $17.0 million, respectively. Unfunded capital commitments in investments in SBIC's and other limited partnerships totaled $6.8 million and $5.5 million as of December 31, 2023 and 2022, respectively. These investments are accounted for under the equity method of accounting.
Qualified Affordable Housing Project Investments
The carrying value of investments in the low income housing partnerships, reported in FHLB and other restricted stock holdings and investments on the consolidated balance sheet, as of December 31, 2023 and 2022 were $3.8 million and $4.5 million, respectively. The related amortization for the years ended December 31, 2023, 2022, and 2021 were $747 thousand, $803 thousand, and $691 thousand, respectively. Unfunded commitments, reported in accrued interest payable and other liabilities on the consolidated balance sheet, as of December 31, 2023 and 2022, were $796 thousand and $1.0 million, respectively.
Litigation
The Corporation is subject to claims and lawsuits that arise primarily in the ordinary course of business. It is the opinion of management the disposition or ultimate resolution of such claims and lawsuits will not have a material adverse effect on the consolidated financial position, results of operations and cash flows of the Corporation.
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19. Parent Company Only Financial Information

CONDENSED BALANCE SHEETS | December 31,
| 2023 |  | 2022
Assets |  |  |
Cash | $ | 100,427 |  |  | $ | 142,832 |
Equity securities | 1,795 |  |  | 2,750 |
Investment in bank subsidiary | 548,493 |  |  | 466,268 |
Investment in non-bank subsidiaries | 23,262 |  |  | 21,566 |
Deferred assets and current receivables | 1,894 |  |  | 1,782 |
Other assets | 925 |  |  | 931 |
Total assets | $ | 676,796 |  |  | $ | 636,129 |
Liabilities |  |  |
Subordinated debentures | $ | 104,887 |  |  | $ | 104,584 |
Other liabilities | 662 |  |  | 783 |
Total liabilities | 105,549 |  |  | 105,367 |
Stockholders' equity | 571,247 |  |  | 530,762 |
Total liabilities and stockholders' equity | $ | 676,796 |  |  | $ | 636,129 |

CONDENSED STATEMENTS OF INCOME | Year Ended December 31,
Income: | 2023 |  | 2022 |  | 2021
Dividends from: |  |  |  |  |
Bank subsidiary | $ | 22,295 |  |  | $ | 21,225 |  |  | $ | 22,165 |
Non-bank subsidiaries | 1,325 |  |  | 1,431 |  |  | 1,700 |
Other | 240 |  |  | 198 |  |  | 210 |
Total income | 23,860 |  |  | 22,854 |  |  | 24,075 |
Expenses | (7,084) |  |  | (6,112) |  |  | (6,657) |
Income before income taxes and equity in undistributed net income of subsidiaries: | 16,776 |  |  | 16,742 |  |  | 17,418 |
Change in net unrealized holdings gains (losses) on equity securities not held for trading | (722) |  |  | (132) |  |  | 121 |
Income tax benefit | 1,606 |  |  | 1,422 |  |  | 1,381 |
Equity in undistributed net income of bank subsidiary | 38,702 |  |  | 43,846 |  |  | 37,178 |
Equity in undistributed (distributions in excess) of net income of non-bank subsidiaries | 1,658 |  |  | 1,310 |  |  | 1,609 |
Net income | 58,020 |  |  | 63,188 |  |  | 57,707 |
Dividends on preferred stock | (4,302) |  |  | (4,302) |  |  | (4,302) |
Net income available to common stockholders | $ | 53,718 |  |  | $ | 58,886 |  |  | $ | 53,405 |
Comprehensive income attributable to the parent | $ | 58,020 |  |  | $ | 63,613 |  |  | $ | 58,008 |

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CONDENSED STATEMENTS OF CASH FLOWS | Year Ended December 31,
| 2023 |  | 2022 |  | 2021
Net income |  |  |  |  |
Adjustments to reconcile net income to net cash provided by | $ | 58,020 |  |  | $ | 63,188 |  |  | $ | 57,707 |
Operating activities: |  |  |  |  |
Equity in undistributed net income of bank subsidiary | (38,702) |  |  | (43,846) |  |  | (37,178) |
(Equity in undistributed) distributions in excess of net income of non–bank subsidiaries | (1,658) |  |  | (1,310) |  |  | (1,609) |
Net realized and unrealized (gains) losses on equity securities | 700 |  |  | 132 |  |  | (121) |
Decrease in other assets | (230) |  |  | 609 |  |  | 60 |
Increase in other liabilities | 2,064 |  |  | 1,571 |  |  | 978 |
Net cash provided by operating activities | 20,194 |  |  | 20,344 |  |  | 19,837 |
Cash flows from investing activities: |  |  |  |  |
Purchase of equity securities | (41) |  |  | (32) |  |  | — |
Sales and maturities of equity securities with readily determinable fair value | 296 |  |  | — |  |  | — |
Investment in bank subsidiaries | (37,000) |  |  | — |  |  | — |
Net cash used in investing activities | (36,745) |  |  | (32) |  |  | — |
Cash flows from financing activities: |  |  |  |  |
Dividends paid on common stock | (14,694) |  |  | (12,557) |  |  | (11,550) |
Dividends paid on preferred stock | (4,302) |  |  | (4,302) |  |  | (4,302) |
Proceeds from issuance of long term debt | — |  |  | — |  |  | 83,484 |
Repayment of long term debt | — |  |  | — |  |  | (50,000) |
Purchase of treasury stock | (6,858) |  |  | (1,707) |  |  | (1,163) |
Net proceeds from issuance of common stock | — |  |  | 94,051 |  |  | — |
Net cash provided by financing activities | (25,854) |  |  | 75,485 |  |  | 16,469 |
Net (decrease) increase in cash | (42,405) |  |  | 95,797 |  |  | 36,306 |
Cash beginning of year | 142,832 |  |  | 47,035 |  |  | 10,729 |
Cash end of year | $ | 100,427 |  |  | $ | 142,832 |  |  | $ | 47,035 |

20. Earnings Per Share
The computation of basic and diluted earnings per common share is shown below. There were no anti-dilutive stock options for the years ended December 31, 2023, 2022, and 2021.

| Years Ended December 31,
| 2023 |  | 2022 |  | 2021
Basic earnings per common share computation |  |  |  |  |
Net income per consolidated statements of income | $ | 53,718 |  |  | $ | 58,886 |  |  | $ | 53,405 |
Net earnings allocated to participating securities | (283) |  |  | (229) |  |  | (183) |
Net earnings allocated to common stock | $ | 53,435 |  |  | $ | 58,657 |  |  | $ | 53,222 |
Distributed earnings allocated to common stock | $ | 14,607 |  |  | $ | 12,508 |  |  | $ | 11,514 |
Undistributed earnings allocated to common stock | 38,828 |  |  | 46,149 |  |  | 41,708 |
Net earnings allocated to common stock | $ | 53,435 |  |  | $ | 58,657 |  |  | $ | 53,222 |
Weighted average common shares outstanding, including shares considered participating securities | 21,010 |  |  | 18,057 |  |  | 16,875 |
Less: Average participating securities | (106) |  |  | (70) |  |  | (55) |
Weighted average shares | 20,904 |  |  | 17,987 |  |  | 16,820 |
Basic earnings per common share | $ | 2.56 |  |  | $ | 3.26 |  |  | $ | 3.16 |
Diluted earnings per common share computation |  |  |  |  |
Net earnings allocated to common stock | $ | 53,435 |  |  | $ | 58,657 |  |  | $ | 53,222 |
Weighted average common shares outstanding for basic earnings per common share | 20,904 |  |  | 17,987 |  |  | 16,820 |
Add: Dilutive effects of performance based-shares | 40 |  |  | 33 |  |  | — |
Weighted average shares and dilutive potential common shares | 20,944 |  |  | 18,020 |  |  | 16,820 |
Diluted earnings per common share | $ | 2.55 |  |  | $ | 3.26 |  |  | $ | 3.16 |

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21. Other Comprehensive Income
Other comprehensive income components and related tax effects were as follows for the years ended December 31, 2023, 2022, and 2021:

| December 31, 2023 |  | December 31, 2022 |  | December 31, 2021
Unrealized holding gains (losses) on available-for-sale securities | $ | 7,785 |  |  | $ | (67,167) |  |  | $ | (19,526) |
Less reclassification adjustment for gains recognized in earnings | (52) |  |  | (651) |  |  | (783) |
Net unrealized gains (losses) | 7,733 |  |  | (67,818) |  |  | (20,309) |
Tax effect | (1,624) |  |  | 14,242 |  |  | 4,265 |
Net-of-tax amount | 6,109 |  |  | (53,576) |  |  | (16,044) |
Amortization of unrealized gains from held-to-maturity securities | 748 |  |  | 1,107 |  |  | — |
Tax effect | (157) |  |  | (232) |  |  | — |
Net-of-tax amount | 591 |  |  | 875 |  |  | — |
Actuarial gains (losses) on postemployment health care plan | (2) |  |  | 303 |  |  | 391 |
Net amortization of transition obligation and actuarial gain | (174) |  |  | (113) |  |  | (43) |
Net unrealized gains (losses) on postemployment health care plan | (176) |  |  | 190 |  |  | 348 |
Tax effect | 37 |  |  | (40) |  |  | (73) |
Net-of-tax amount | (139) |  |  | 150 |  |  | 275 |
Unrealized gains on interest rate swap | — |  |  | 411 |  |  | 105 |
Less reclassification adjustment for gains (losses) recognized in earnings | (151) |  |  | 127 |  |  | 276 |
Net unrealized gains (losses) | (151) |  |  | 538 |  |  | 381 |
Tax effect | 32 |  |  | (113) |  |  | (80) |
Net-of-tax amount | (119) |  |  | 425 |  |  | 301 |
Other comprehensive income (loss) | $ | 6,442 |  |  | $ | (52,126) |  |  | $ | (15,468) |

The following is a summary of the change in the accumulated other comprehensive income (loss) balance, net of tax, for the years ended December 31, 2023, 2022, and 2021.

| Balance December 31, 2022 |  | Comprehensive Income (Loss) |  |  |  | Balance December 31, 2023
Unrealized gains on securities available-for-sale | $ | (54,282) |  |  | $ | 6,109 |  |  |  |  | $ | (48,173) |
Amortization of unrealized gains from held-to-maturity securities | 875 |  |  | 591 |  |  |  |  | 1,466 |
Unrealized gains (losses) on postretirement benefits plan | 768 |  |  | (139) |  |  |  |  | 629 |
Unrealized gains (losses) on interest rate swap | 119 |  |  | (119) |  |  |  |  | — |
Total | $ | (52,520) |  |  | $ | 6,442 |  |  |  |  | $ | (46,078) |

| Balance December 31, 2021 |  | Comprehensive Income (Loss) |  |  |  | Balance December 31, 2022
Unrealized losses on securities available-for-sale | $ | (706) |  |  | $ | (53,576) |  |  |  |  | $ | (54,282) |
Amortization of unrealized gains from held-to-maturity securities | — |  |  | 875 |  |  |  |  | 875 |
Unrealized gains on postretirement benefits plan | 618 |  |  | 150 |  |  |  |  | 768 |
Unrealized gains (losses) on interest rate swap | (306) |  |  | 425 |  |  |  |  | 119 |
Total | $ | (394) |  |  | $ | (52,126) |  |  |  |  | $ | (52,520) |

| Balance January 1, 2021 |  | Comprehensive Income (Loss) |  |  |  | Balance December 31, 2021
Unrealized gains (losses) on securities available-for-sale | $ | 15,338 |  |  | $ | (16,044) |  |  |  |  | $ | (706) |
Unrealized gains on postretirement benefits plan | 343 |  |  | 275 |  |  |  |  | 618 |
Unrealized gains (losses) on interest rate swap | (607) |  |  | 301 |  |  |  |  | (306) |
Total | $ | 15,074 |  |  | $ | (15,468) |  |  |  |  | $ | (394) |

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ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
None.
ITEM 9A. CONTROLS AND PROCEDURES
The Corporation’s management, under the supervision of and with the participation of the Corporation’s Principal Executive Officer and Principal Financial Officer, has carried out an evaluation of the design and effectiveness of the Corporation’s disclosure controls and procedures as defined in Rule 13a-15(e) and Rule 15d-15(e) of the Securities Exchange Act of 1934 as of the end of the period covered by this report. Based upon that evaluation, management, including the Principal Executive Officer and Principal Financial Officer, have concluded that, as of the end of such period, the Corporation’s disclosure controls and procedures are effective to provide reasonable assurance that all material information required to be disclosed in reports the Corporation files or submits under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported, within the time periods specified in the Securities and Exchange Commission’s rules and forms.
Management’s Report on Internal Control Over Financial Reporting
The management of the Corporation is responsible for establishing and maintaining adequate internal control over financial reporting as defined in Rules 13a-15(f) and 15d-15(f) under the Securities Exchange Act of 1934. The Corporation’s internal control over financial reporting is designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with accounting principles generally accepted in the U.S.
The Corporation’s internal control over financial reporting includes those policies and procedures that: (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the Corporation; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the Corporation are being made only in accordance with authorizations of management and directors of the Corporation; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the Corporation’s assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
Management assessed the effectiveness of the Corporation’s internal control over financial reporting as of December 31, 2023. In making this assessment, management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in the 2013 Internal Control-Integrated Framework. Based on our assessment and those criteria, management concluded that the Corporation maintained effective internal control over financial reporting as of December 31, 2023. The effectiveness of our internal control over financial reporting as of December 31, 2023 has been audited by FORVIS, LLP, an independent registered public accounting firm that audited the Corporation’s financial statements, as stated in their report which is located in Item 8 of this Annual Report on Form 10-K.

/s/ Michael D. Peduzzi |  | /s/ Tito L. Lima
President and Chief Executive Officer |  | Treasurer and Principal Financial Officer
Date: March 7, 2024 |  | Date: March 7, 2024

ITEM 9B. OTHER INFORMATION
During the three months ended December 31, 2023, no director or officer of the Corporation, nor the Corporation itself, adopted or terminated a “Rule 10b5-1 trading arrangement” or “non-Rule 10b5-1 trading arrangement,” as each term is defined in Item 408(a) of Regulation S-K.
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ITEM 9C. DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS
None.
PART III.
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
The information required by this Item 10 is incorporated herein by reference from our definitive Proxy Statement for our 2024 Annual Meeting of Stockholders (the "2024 Proxy Statement"), which we will file with the SEC on or before 120 days after our 2023 fiscal year-end, and which will appear in the 2024 Proxy Statement under the captions "Proposal 1. Election of Directors," "Executive Officers," "Corporate Governance – Meetings and Committees of the Board of Directors – Audit Committee," "Certain Transactions" and "Other Matters – Delinquent Section 16(a) Reports."
The Corporation’s Board of Directors has approved a Code of Ethics for Officers and Directors. The Code of Ethics can be found at the Bank’s website, www.cnbbank.bank.
ITEM 11. EXECUTIVE COMPENSATION
Information required by this Item 11 is incorporated herein by reference from the 2024 Proxy Statement, including the information in the 2024 Proxy Statement appearing under the captions "Compensation Discussion and Analysis," "Compensation of Executive Officers," "Compensation Committee Report" and "Compensation of Directors."
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS
Information required by this Item 12 is incorporated herein by reference from the 2024 Proxy Statement, including the information in the 2024 Proxy Statement appearing under the captions "Stock Ownership" and "Compensation of Executive Officers – Equity Compensation Plan Information."
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE
Information required by this Item 13 is incorporated herein by reference from the 2024 Proxy Statement, including the information in the 2024 Proxy Statement appearing under the captions "Proposal 1. Election of Directors," "Corporate Governance" and "Certain Transactions."
ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES
Information required by this Item 14 is incorporated herein by reference from the 2024 Proxy Statement, including the information in the 2024 Proxy Statement appearing under the captions "Corporate Governance – Meetings and Committees of the Board of Directors – Audit Committee," "Proposal No. 4: Ratification of the Appointment of Independent Registered Public Accounting Firm" and "Concerning the Independent Registered Public Accounting Firm."
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PART IV.
ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a)(1) The following consolidated financial statements are set forth in Part II, Item 8:
Report of Independent Registered Public Accounting Firm
FORVIS, LLP, Indianapolis, IN, (U.S. PCAOB Auditor Firm I.D.: 686);
Crowe LLP, Columbus, OH, (U.S. PCAOB Auditor Firm I.D.: 173)
Consolidated Balance Sheets as of December 31, 2023 and 2022
Consolidated Statements of Income and Comprehensive Income for the years ended December 31, 2023, 2022, and 2021
Consolidated Statements of Cash Flows for the years ended December 31, 2023, 2022, and 2021
Consolidated Statements of Changes in Shareholders’ Equity for the years ended December 31, 2023, 2022, and 2021
Notes to Consolidated Financial Statements
(a)(2) Financial statement schedules are not applicable or are included in the consolidated financial statements or related notes.
(a)(3) The following exhibits are filed as a part of this report:

Exhibit No. |  | Description
3.1 |  | Second Amended and Restated Articles of Incorporation of CNB Financial Corporation (incorporated by reference to Exhibit 3.1 to the Registrant's Current Report on Form 8-K filed on April 18, 2019)
3.2 |  | Second Amended and Restated Bylaws of CNB Financial Corporation (incorporated by reference to Exhibit 3.2 to the Registrant's Current Report on Form 8-K filed on April 18, 2019)
3.3 |  | Statement with Respect to Shares of 7.125% Series A Fixed-Rate Non-Cumulative Perpetual Preferred Stock, effective as of August 25, 2020 (incorporated by reference to Exhibit 3.1 to the Registrant’s Current Report on Form 8-K filed on August 25, 2020)
4.1 |  | Description of Registrant's Securities (incorporated by reference to Exhibit 4.1 to the Registrant’s Annual Report on Form 10-K filed on March 3, 2022)
4.2 |  | Form of Certificate representing the 7.125% Series A Fixed-Rated Non-Cumulative Perpetual Preferred Stock (incorporated by reference to Exhibit 4.1 to the Registrant’s Current Report on Form 8-K filed on August 25, 2020)
4.3 |  | Deposit Agreement, dated August 25, 2020, among CNB Financial Corporation, American Stock Transfer & Trust Company, LLC, and the holders from time to time of the depositary receipts described therein (incorporated by reference to Exhibit 4.2 to the Registrant’s Current Report on Form 8-K filed on August 25, 2020)
4.4 |  | Form of Depositary Receipt representing the Depositary Shares (included as Exhibit A to Exhibit 4.3 of the Registration Statement on Form 8-A filed on August 25, 2020)
4.5 |  | Form of 3.25% Fixed-to-Floating Rate Subordinated Note due 2031 (incorporated by reference to Exhibit 4.1 to the Registrant’s Current Report on Form 8-K filed on June 3, 2021)
10.1(1) |  | CNB Financial Corporation 2019 Omnibus Incentive Plan (incorporated by reference to Exhibit 10.1 to the Registrant's Current Report on Form 8-K filed on April 18, 2019)
10.2(1) |  | Form of CNB Financial Corporation 2019 Omnibus Incentive Plan Restricted Stock Agreement (incorporated by reference to Exhibit 10.2 to the Registrant’s Annual Report on Form 10-K filed on March 3, 2023)
10.3(1) |  | Form of CNB Financial Corporation 2019 Omnibus Incentive Plan Performance Restricted Stock Agreement (incorporated by reference to Exhibit 10.3 to the Registrant’s Annual Report on Form 10-K filed on March 3, 2023)

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Exhibit No. |  | Description
10.4(1) |  | Executive Employment Agreement dated October 24, 2019 by and among CNB Financial Corporation, CNB Bank and Joseph B. Bower Jr. (incorporated by reference to Exhibit 10.1 to the Registrant's Current Report on Form 8-K filed on October 25, 2019)
10.5(1) |  | Executive Employment Contract, dated February 8, 2012, by and between CNB Bank and Richard L . Greslick, Jr. (incorporated by reference to Exhibit 10.2 to the Registrant's Current Report on Form 8-K filed on March 9, 2012)
10.6(1) |  | Letter Agreement, dated April 4, 2022, by and between CNB, CNB Bank and Joseph E. Dell, Jr. (incorporated by reference to Exhibit 10.1 to the Registrant's Current Report on Form 8-K filed on April 4, 2022)
10.7(1) |  | Executive Employment Agreement, dated March 23, 2020, by and between CNB Financial Corporation, CNB Bank and Tito L. Lima (incorporated by reference to Exhibit 10.1 to the Registrant's Current Report on Form 8-K filed on March 24, 2020)
10.8(1) |  | Executive Employment Agreement, dated August 30, 2021, by and between CNB Financial Corporation, CNB Bank and Martin T. Griffith (incorporated by reference to Exhibit 10.1 to the Registrant's Current Report on Form 8-K filed on September 3, 2021)
10.9(1) |  | Executive Employment Agreement, dated November 27, 2023, by and between CNB Financial Corporation, CNB Bank and Michael Peduzzi (incorporated by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K filed on November 30, 2023)
10.10(1) |  | Executive Employment Contract, dated October 7, 2015, by and between CNB Bank and Leanne D. Kassab (incorporated by reference to Exhibit 10.10 to the Registrant’s Annual Report on Form 10-K filed on March 3, 2023)
10.11(1) |  | Executive Salary Continuation Plan Agreement, by and between CNB Bank and Joseph B. Bower, Jr., amended and restated, effective as of January 1, 2013 (incorporated by reference to Exhibit 10.11 to the Registrant’s Annual Report on Form 10-K filed on March 3, 2023)
10.12(1) |  | Executive Salary Continuation Plan Agreement, by and between CNB Bank and Richard L. Greslick, Jr., effective as of January 1, 2013 (incorporated by reference to Exhibit 10.12 to the Registrant’s Annual Report on Form 10-K filed on March 3, 2023)
10.13(1) |  | Supplemental Executive Retirement Plan for Michael D. Peduzzi, effective as of January 1, 2022 (incorporated by reference to Exhibit 10.13 to the Registrant’s Annual Report on Form 10-K filed on March 3, 2023)
10.14 |  | Form of Subordinated Note Purchase Agreement, dated June 3, 2021, by and among CNB Financial Corporation and the Purchasers identified therein (incorporated by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K filed on June 3, 2021)
10.15(1) |  | Defined Contribution Plan for Tito L. Lima, effective as of January 2, 2022 (incorporated by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K filed on January 4, 2022)
10.16(1) |  | Defined Contribution Plan for Leanne Kassab, effective as of January 1, 2022 (incorporated by reference to Exhibit 10.16 to the Registrant’s Annual Report on Form 10-K filed on March 3, 2023)
10.17(1) |  | Executive Deferred Compensation Plan, amended and restated, effective as of January 1, 2005 (incorporated by reference to Exhibit 10.17 to the Registrant’s Annual Report on Form 10-K filed on March 3, 2023)
10.18(1) |  | Executive Deferred Compensation Plan Amendment No. 1, dated as of January 19, 2015 (incorporated by reference to Exhibit 10.18 to the Registrant’s Annual Report on Form 10-K filed on March 3, 2023)
10.19(1) |  | Amendment No. 1 to Defined Contribution Plan for Tito L. Lima (incorporated by reference to Exhibit 10.2 to the Registrant’s Current Report on Form 8-K filed on October 2, 2023)

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Exhibit No. |  | Description
10.20(1) |  | Amendment No. 1 to Defined Contribution Plan for Leanne Kassab (incorporated by reference to Exhibit 10.4 to the Registrant’s Current Report on Form 8-K filed on October 2, 2023)
10.21(1) |  | Amendment No. 1 to Supplemental Executive Retirement Plan (incorporated by reference to Exhibit 10.6 to the Registrant’s Current Report on Form 8-K filed on October 2, 2023)
10.2 2(1) |  | Schedule A to Supplemental Executive Retirement Plan for Michael D. Peduzzi (incorporated by reference to Exhibit 10.7 to the Registrant’s Current Report on Form 8-K filed on October 2, 2023)
10.23(1) |  | Schedule A to Supplemental Executive Retirement Plan for Tito L. Lima (incorporated by reference to Exhibit 10.8 to the Registrant’s Current Report on Form 8-K filed on October 2, 2023)
10.24(1) |  | Schedule A to Supplemental Executive Retirement Plan for Leanne Kassab (incorporated by reference to Exhibit 10.9 to the Registrant’s Current Report on Form 8-K filed on October 2, 2023)
10.25(1) |  | Schedule A to Supplemental Executive Retirement Plan for Martin Griffith (incorporated by reference to Exhibit 10.10 to the Registrant’s Current Report on Form 8-K filed on October 2, 2023)
10.26(1) |  | Amendment No. 1 to Executive Salary Continuation Plan Agreement for Richard L. Greslick (incorporated by reference to Exhibit 10.12 to the Registrant’s Current Report on Form 8-K filed on October 2, 2023)
21 |  | List of subsidiaries of CNB Financial Corporation (incorporated by reference to Exhibit 21 to the Registrant’s Annual Report on Form 10-K filed on March 3, 2023)
23.1 |  | Consent of FORVIS, LLP
23.2 |  | Consent of Crowe LLP
31.1 |  | Certification of Chief Executive Officer pursuant to Rule 13a-14(a)/15d-14(a) of the Securities Exchange Act of 1934, as amended, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.2 |  | Certification of Chief Financial Officer pursuant to Rule 13a-14(a)/15d-14(a) of the Securities Exchange Act of 1934, as amended, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32.1 |  | Certification of Chief Executive Officer pursuant to 18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
32.2 |  | Certification of Chief Financial Officer pursuant to 18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
97.1 |  | Policy Relating to Recovery of Erroneously Awarded Compensation
101.INS |  | Inline XBRL Instance Document
101.SCH |  | Inline XBRL Taxonomy Extension Schema Document
101.CAL |  | Inline XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF |  | Inline XBRL Taxonomy Extension Definitions Linkbase Document
101.LAB |  | Inline XBRL Taxonomy Extension Presentation Label Linkbase Document
101.PRE |  | Inline XBRL Taxonomy Extension Presentation Linkbase Document

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Exhibit No. |  | Description
104 |  | Cover Page Interactive Data File (embedded within the Inline XBRL document)

(1) Indicates a management contract or compensatory plan.
ITEM 16. FORM 10-K SUMMARY
None.
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SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

|  |  |  | CNB FINANCIAL CORPORATION
|  |  |  | (Registrant)
Date: | March 7, 2024 |  | By: | /s/ Michael D. Peduzzi
|  |  |  | MICHAEL D. PEDUZZI
|  |  |  | President & Chief Executive Officer

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities indicated on March 7, 2024.

/s/ Michael D. Peduzzi |  | /s/ Jeffrey S. Powell
MICHAEL D. PEDUZZI |  | JEFFREY S. POWELL, Chairperson
President and Director |  |
(Principal Executive Officer) |  |
/s/ Richard L. Greslick, Jr. |  | /s/ Richard B. Seager
RICHARD L. GRESLICK, JR. |  | RICHARD B. SEAGER, Director
Secretary and Director |  |
/s/ Tito L. Lima |  | /s/ Francis X. Straub, III
TITO L. LIMA |  | FRANCIS X. STRAUB, III, Director
Treasurer |  |
(Principal Financial and Accounting Officer) |  |
/s/ N. Michael Obi |  | /s/ Peter C. Varischetti
N. MICHAEL OBI, Director |  | PETER C. VARISCHETTI, Director
/s/ Joel E. Peterson |  | /s/ Julie M. Young
JOEL E. PETERSON, Director |  | JULIE M. YOUNG, Director
/s/ Deborah Dick Pontzer |  |
DEBORAH DICK PONTZER, Director |  |
/s/ Peter F. Smith |  |
PETER F. SMITH, Director |  |
/s/ Nicholas N. Scott |  |
NICHOLAS N. SCOTT, Director |  |

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